In this article we will discuss about Import Policy of India. After reading this article you will learn about: 1. Import Policies followed during Pre-Reform Period 2. Import Policies followed during the Reform Period.
Import Policies followed during Pre-Reform Period:
The import policy of India was formulated as a part of foreign trade policy of the country.
During the post- independence period, the import policy of the country was formulated at different times in order to attain the following requirements:
(a) Limiting the volume of imports to the minimum level in order to conserve foreign exchange,
(b) Encouraging imports of those items required for industrialisation of the country and
(c) Modifying imports for exports promotion.
Thus broadly the import policy of the country during the pre-reform period has two important constituents, i.e:
(a) Import restrictions and
(b) Import substitution.
The country formulated the import policy of the country considering its limited foreign exchange reserve, requirements of capital goods for industrialisation and necessity for import substitution. During the first decade of planning, the country adopted a liberal import policy and thus suffered a serious foreign exchange crisis at the end of the Second Plan.
Considering the situation, the Government reversed its import policy and imposed heavy restrictions on imports. In 1962, the Mudaliar Committee recommended import of raw materials and other components for various industries in power, transport, export-oriented industries, import substituting industries producing raw material and components etc.
After the devaluation of rupee in 1966, the import policy was liberalised for 59 priority industries which included export industries, capital building industries and industries producing commodities for mass consumption. Moreover, after the introduction of raw agricultural strategy since 1966 the Government permitted import of agricultural inputs like seed, fertilizers, pesticides etc.
Thus, with the intention of following a blending of specified import restrictions and import substitution, during the pre-reform period, imports were divided into different categories, viz., consumer goods, intermediate goods and capital goods.
Each category of goods was sub-divided into non-permissible (banned), limited permissible (with mandatory certification but with clearance from the CCI and E) automatic permissible (without mandatory certificate but with clearance from the CCI and E) and open general license (OGL, without certification and without clearance of the CCI and E) groups.
Accordingly, licenses for imports were categorized again based on user type like established importer, actual user, new comer, ad hoc, export promotion scheme related and others (like replacement license). Considering the increasing foreign exchange difficulties, more and more items were brought under import restrictions right up to 1977-78.
However, after the devaluation of 1966, there was a brief period of pursuing policies of import liberalisation. But after 1977-78, the Government followed a new era of import liberalisation in the country and the same process was followed in 1980s.
The broad details of the import liberalisation measures as incorporated in export import policies included:
(i) Policy for import of capital goods,
(ii) Policy for import of raw materials,
(iii) Import policy for registered exporters,
(iv) Policy for export trading house, and
(v) Policy for import of technology.
Since 1977-78, the Government introduced import liberalisation Policy which was further carried during 1980s. This was done in order to provide imported inputs to the industrial sector, to stimulate investments, to support indigenous R&D programme, to expand export capacities, to earn international competitiveness and to promote import substitutions and self reliance.
Exim Policy, 1990:
On April 30, 1990 the Government announced a new Import-Export Policy for a three-year period, terminating the previous policy.
The provisions made in this new policy include the following:
(a) OGL list of imports expanded and 82 capital goods items were included;
(b) Import of certain raw materials have been canalized:
(c) Introduction of automatic licensing up to 10 per cent of the value of previous imports;
(d) Expansion of REP licensing scheme;
(e) Providing additional licenses to Export and Trading houses to import raw materials and components;
(f) Introducing star trading houses for granting additional licenses at the rate of 15 per cent foreign exchange earned;
(g) Introduction of Duty Exemption Scheme and Blanket advances Scheme; and
(h) Withdrawing the scheme of Import-Export Pass Book.
Import Policies followed during the Reform Period:
During the reform period (since 1991), the import policies followed in the country experienced continuous changes in order to make the policy much more rational and open under the globalisation regime.
Over the years, trade policy has undergone fundamental shifts to correct the earlier anti-export bias and import restrictions through the withdrawal of quantitative restrictions (QRs), reduction and rationalisation of tariffs, liberalisation in trade and payments regime and improved access to export incentives by providing duty free import to meet essential requirements, besides a realistic and market based on exchange rate.
Thus the quantitative restrictions were dismantled on imports and the peak rate of customs duty on imports has also been slashed considerably to 10 per cent. The new trade policy, 2004-09 makes provisions for duty free import of capital goods for agricultural sectors under Export Promotion Capital Goods (EPCG) scheme in its special focus initiatives.
Again, import of machinery and equipments for Effluent Treatment Plants for leather industry were also exempted from customs duty. Again under the new Foreign Trade Policy, 2009-14, additional items were allowed within the existing duty free imports entitlements for some employment oriented sectors like sports goods,leather garments, footwear and textile stems.
Again, the annual Foreign Trade Policy, 2013-14 announced that the EPCG scheme, which allows exporters to import capital goods at zero duty, would be extended beyond March, 2013 and would be applicable to all sectors. Thus in this way, the import policies formulated in the country during the reform period has been continuously changed in order to make it adaptive and much more industry friendly.