Dibrugarh University B.Com 6th Sem: International Business Solved Papers (May' 2015)

2015 (May)
COMMERCE (General)
Course: 602 (International Business)
Time: 3 hours
Full Marks: 80
Pass marks: 32
The figures in the margin indicate full marks for the questions

1. Write the full form of the following:                                   1x8=8
(a)    ECGC = Export Credit Guarantee Corporation of India Limited
(b)   FDI = Foreign Direct Investment.
(c)    EPCG = Export Promotion Capital Goods Scheme.
(d)   SEZ = Special Economic Zone.
(e)   FOB = Free on Board.
(f)     IIFT = Indian Institute of Foreign Trade.
(g)    STC = State Trading Corporation.
(h)   EPIP = Export Promotion Industrial Park
2. Write short notes on:                                                             4x4=16
a) Export-oriented Units: The EOU scheme was introduced in the year 1980 vide Ministry of Commerce resolution dated 31st December 1980. The purpose of the scheme was basically to boost exports by creating additional production capacity. The EOU scheme is, at present, governed by the provisions of Export and Import (EXIM) Policy, 1997-2002. Under this scheme, the units undertaking to export their entire production of goods are allowed to be set up. The EOUs can export all products except prohibited items of exports in ITC (HS).
Under the EOU scheme, the units are allowed to import or procure locally without payment of duty all types of goods including capital goods, raw materials, components, packing materials, consumables, spares and various other specified categories of equipments including material handling equipments, required for export production or in connection therewith. However, the goods prohibited for import are not permitted. In the case of EOUs engaged in agriculture, animal husbandry, floriculture, horticulture, pisciculture, viticulture, poultry, sericulture and granite quarrying, only specified categories of goods mentioned in the relevant notification have been permitted to be imported duty-free.
b) Product Export Development Authorities.
c) Multilateral Agreement.
d) Export Trading Houses.
3. (a) Explain the direction of foreign trade of India during last ten years.           12
Ans: Direction of Indian foreign trade since last 10 years or after liberalisation
The international environment is very important from the pint of view of certain categories of business. It is particularly important for industries directly depending on imports or exports and import-competing industries. An international marketer is required to understand, evaluate and work out various parameters before venturing into any country. These Parameters are called environmental factors and they determine the direction and purpose of the international business operation. Many decisions depend upon environmental factors right from selection of the country, location of the plant liaison with the government, and entry of investment from local bodies, product launch, channel management, promotion and opening of outlets. The first challenge for an organization is to navigate from its home country to the host country. Thereafter it has to develop a proper system so that the venture is successful in the host country; learn all about the regulatory bodies both in the host country and home country; understand the customer’s changing tastes and attitude towards foreign goods and finally obtain revenue and make the business effective with right people.
The severity of economic crisis of 1991 provided an opportunity to the Government to make far-reaching changes in macroeconomic policy. There was liberalisation of domestic investment by removing direct controls on private sector and adopted fiscal and monetary policies to promote growth. Besides, the New Economic Policy pursued since 1991 also liberalized foreign trade and investment. The growth strategy was made export-oriented. Not only quantitative restrictions on imports have been removed but also customs duties have been drastically reduced.
Thus efforts have been made to integrate the Indian economy with the global economy. Rupee was devalued in 1991 and from 1993 exchange rate of rupee was made market-determined. It is, therefore, important to know how India’s foreign trade sector has performed in response to these important changes in economic policy framework.
The performance of foreign trade since 1991 is shown in Table 27.6 which reveals that after a transition period of 2 years, merchandise exports grew at about 20 per cent a year in dollar terms for three successive years during 1993-94 to 1995-96. Then due to slowdown in world trade and recession in the USA which is India’s major trade partner, annual growth of exports slowed down from 1996-97 to 1999-2000.
However after 2000 up till 2007-08 with the exception of year 2001 -02 there was more than 20 per cent annual growth of exports on sustained basis for over eight years (2000 to 2008) and in 2007-08 average annual growth rate of our exports was around 29 per cent.

Despite the sluggish performance of exports from 1996-97 to 1998-99 deficit in trade balance remained below 4 per cent of GDP (See Col. IV of Table 27.8) due to the equally subdued growth in imports during this period. During the four-year period, 2004-05 to 2007-08, India’s imports grew at a much higher rate due to robust industrial growth relative to growth in our exports and as a result deficit in our trade balance greatly increased; as a percentage of GDP it was 4.8 per cent in 2004-05, 6.8 per cent in 2006-07, and 7.8 per cent in 2007-08.
Due to global financial crisis and consequent economic slowdown in the US and European countries, the growth rate of our exports fell to 13.6 per cent in 2008-09, whereas imports grew at 26.7 per cent. As a result deficit in our trade balance rose to 12 per cent of GDP.
Bolstered by the measures taken by the government to help exports in the aftermath of the world recession of 2008 and also the low base effect, India’s export growth of 40.5 per cent in 2010-11 reached an all time high since Independence. Though it decelerated in 2011 -12 to 21.3 per cent, it was still above 20 per cent and higher than the compound annual growth rate (CAGR) of 20.3 per cent for the period 2004-05 to 2011-12.
After registering very high growth of 56.5 per cent in July 2011, export growth started decelerating with a sudden fall to single digits in November 2011 as a result of the emerging global situation and then to negative figures from March 2012. Export growth rate in 2012-13 was negative and equal to – 1.8%. For three months in 2012-13, exports declined YOY by double digits with the largest decline recorded in July 2012 at – 15.1 per cent.
Export growth in dollar terms was negative at-1.8 per cent in 2012-13, compared to 21.3 percent growth in 2011-12 (full year). In rupee India’s export growth has almost continuously been above world export growth in the 2000s decade and in 2011. One issue that has been a topic of debate is whether India’s export growth rate is dependent on world growth/trade or exchange rate. There is a strong correspondence between India’s export growth and world export growth.
(b) Write a brief note on Export-Import Policy of India.                                         12
Ans: Export – Import Policy or Foreign Trade Policy: No country is self-sufficient in the world today.  Therefore, every country has to import goods and to pay for imports it has to export goods to other countries.  The ideal situation would be if every country specialized in the production of those goods in which it has a comparative cost advantage.  But in addition to comparative cost several other factors including political considerations have played an important part in determining the pattern of imports and exports. To protect domestic industries, many countries in the past had imposed heavy tariffs to restrict imports. 
India's Foreign Trade Policy also known as Export Import Policy (EXIM) in general, aims at developing export potential, improving export performance, encouraging foreign trade and creating favorable balance of payments position. Foreign Trade Policy is prepared and announced by the Central Government (Ministry of Commerce). Foreign Trade Policy or EXIM Policy is a set of guidelines and instructions established by the DGFT (Directorate General of Foreign Trade) in matters related to the import and export of goods in India.
The foreign trade policy, has offered more incentives to exporters to help them tide over the effects of a likely demand slump in their major markets such as the US and Europe. Foreign trade is exchange of capital, goods, and services across international borders or territories. In most countries, it represents a significant share of gross domestic product (GDP). While international trade has been present throughout much of history, its economic, social, and political importance has been on the rise in recent centuries.
Export- Import (EXIM) Policy 2002-07 
In order to maintain the balance of payments and to avoid trade deficit the government of India has announced a trade policy for imports and exports. After every five years the government of India reviews the import and export policy in view of the changing international economic situation.  The policy relates to promotion of exports and regulation of imports so as to promote economic growth and overcome trade deficit. Accordingly, the export-and import policies (EXIM Policy) were announced by the government first in 1985 and then in 1988 which was again revised in 1990.  All these policies made necessary provision for extension of import liberalisation measures.  All these policies made necessary provision for import of capital goods and raw materials for industrialization, utilisation and liberalisation of REP (Registered Exporters Policy) licenses, liberal import of technology and policy for export and trading houses.  The government announced its new EXIM policy for 2002-2007 which is mainly a continuation of the EXIM policy of 1997-2002. The new export-import policy for 2002-2007 aims at pushing up growth of exports to 12 per cent a year as compared to about 1.56 per cent achieved during the financial year 2001-2002.  
The main features of this export- import policy are given below:
a)      Concessions to exporters: To enable Indian companies to compete effectively in the competitive international markets and to give a boost to sagging exports various concessions had been given to the exporters in this new EXIM policy 2002-2007.  These concessions are:
i)        Exporters will now have 360 days to bring in their foreign exchange remittances as compared to the earlier limit of 180 days.
ii)       Exporters will be allowed to retain the entire amount held in their exchange earner foreign currency (EEFC) accounts.
iii)     Exporters will now get long-term loans at the prime lending rate for that tenure.
b)      Duty Entitlement Pass Book (DEPB) and Export Promotion Capital Goods (EPCG) SchemesDEPB and EPCG are important tools of promoting exports.  These schemes have been made more flexible.  In the DEPB and EPCG schemes new initiatives have been granted to the cottage industries, handicrafts, chemicals and pharmaceuticals, textile and leather products.
c)       Strengthening Special Export Zones (SEZ): The new long-term EXIM policy has sought to enable Indian SEZs to be at par with its international rivals.  The EXIM policy has given a boost to the banking sector reforms by permitting Indian banks to set up overseas banking units in SEZs. 
d)      Soft options for computer hardware industry: The export import (EXIM) policy has put the Indian computer manufacturers at par with manufacturers in other parts of the world. Companies manufacturing or assembling computers in the country will be able to import both capital and raw materials at lower duty rates to sell in the domestic market.
As per the information technology agreement which is part of the world trade organisation zero duty the agreement on I. T. sector, 217 I. T. components would attract a zero duty by 2005.  Therefore, foreign companies can import these products into the country while Indian manufacturers who did the same had to meet export obligations on their imports.  Now, the new EXIM policy states that domestic sales will be considered as a fulfillment of the export obligation, thereby freeing the domestic manufacturers from exports completely.
Salient Features of Foreign Trade Policy 2009-14
1.       $ 200 billion or Rs 98,000 crore is the export target for 2010-11.
2.       100% growth of India’s export of goods and services by 2014.
3.       15% growth target for next two years; 25% thereafter.
4.       3.28% targeted India’s share of global trade by 2020 double from the current 1.64%.
5.       Jaipur, Srinagar Anantnag, Kanpur, Dewas and Ambur identified as towns of export excellence.
6.       26 new markets added to focus market scheme.
7.       Provision for state-run banks to provide dollar credits.
8.       Duty entitlement passbook scheme extended till Dec. 2010.
9.       Tax sops for export-oriented and software export units extended till March 2011.
10.   New directorate of trade remedy measures to be set up.
11.   Plan for diamond bourses.
12.   New facility to allow import of cut and polished diamonds for grading and certification.
13.   Export units allowed to sell 90% of goods in domestic market.
14.   Export oriented instant tea companies can sell up to 50% produce in domestic market.
15.   Single-window scheme for farm exports.
16.   Number of duty-free samples for exporters raised to 50 pieces.
17.   Value limits of personal carriage increased to $5 million (Rs 24.5 core) for participation in overseas exhibitions.
Salient Features of the present  Foreign Trade Policy 2015-2020
1.       Increase exports to $900 billion by 2019-20, from $466 billion in 2013-14
2.       Raise India's share in world exports from 2% to 3.5%.
3.       Merchandise Export from India Scheme (MEIS) and Service Exports from India Scheme (SEIS) launched.
4.       Higher level of rewards under MEIS for export items with High domestic content and value addition.
5.       Chapter-3 incentives extended to units located in SEZs.
6.       Export obligation under EPCG scheme reduced to 75% to Promote domestic capital goods manufacturing.
7.       FTP to be aligned to Make in India, Digital India and Skills India initiatives.
8.       Duty credit scrips made freely transferable and usable For payment of custom duty, excise duty and service tax.
9.       Export promotion mission to take on board state Governments
10.   Unlike annual reviews, FTP will be reviewed after two-and-Half years.
11.   Higher level of support for export of defence, farm Produce and eco-friendly products.
4. (a) What is exchange control? Explain the objectives of exchange control.         3+8=11
Ans: Meaning of Exchange Control
Exchange control is one of the important means of achieving certain national objectives like an improvement in the balance of payments position, restriction of inessential imports and conspicuous consumption, facilitation of import of priority items, control of outflow of capital and maintenance of the external value of the currency. Under the exchange control, the whole foreign exchange resources of the nation, including those currently occurring to it, are usually brought directly under the control of the exchange control authority (the Central Bank, treasury or a specially constituted agency). Dealings and transactions in foreign exchange are regulated by the exchange control authority. Exporters have to surrender the foreign exchange earnings in exchange for home currency and the permission of the exchange control authority have to be obtained for making payments in foreign exchange. It is generally necessary to implement the overall regulations with a host of detailed provisions designed to eliminate evasion. The allocation of foreign exchange is made by the exchange control authority, on the basis of national priorities. Though the exchange control is administered by a central authority like the central bank, the day-to-day business of buying and selling foreign exchange ill ordinarily handled by private exchange dealers, largely the exchange department of commercial banks. For example, in India there are authorised dealers and money changers, entitled to conduct foreign exchange business.
Definition: Exchange control is a system in which the government of the country intervenes not only to maintain a rate of exchange which is quite different from what would have prevailed without such control and to require the home buyers and sellers of foreign currencies to dispose of their foreign funds in particular ways.
According to Crowther:
“When the Government of a country intervenes directly or indirectly in international payments and undertakes the authority of purchase and sale of foreign currencies it is called Foreign Exchange Control”.
Simply, Exchange Control means the control of the government in the purchase and sale of foreign currencies in order to restore the balance of payments equilibrium and disregard the market forces in the decision of monetary authority.
Objectives/Importance of Exchange Control are outlined below:
1.       To Conserve Foreign Exchange: The main objective of foreign exchange regulation in India, as laid dawn in the Foreign Exchange Regulation Act (FERA), 1973, is the conservation of the foreign exchange resources of the country and the proper utilisation thereof in the interest of the national development. This is one of the important objectives .of foreign exchange regulation of many other countries too.
2.       To Check Capital Flight: Exchange control may be employed to prevent flight of capital from the country and to regulate the normal day-to-day capital movements. If adequately implemented and enforced, exchange control tends to be highly effective in curbing erratic outflows of capital.
3.       To Improve Balance of Payments: Exchange control is one of the measures available to improve the balance of payments position. This can be achieved by restricting imparts by means of exchange control.
4.       To make Possible Essential Imports: Due to the non-availability of or scarcity within the country, the developing countries generally have to import capital goods, know how and certain essential inputs and consumer goods. By giving priority to such imports in the allocation of foreign exchange, exchange control may ensure availability of foreign exchange for these imports.
5.       To Protect Domestic Industries: Exchange control may also be employed as a measure to protect domestic industries from foreign competition.
6.       To Check Recession-induced Exports into the Country: If foreign economies are undergoing recession when 'the domestic economy is free from it, the decline in prices of foreign goods, due to the recession, may encourage their exports into the country not yet affected by recession. Exchange control may be employed to check such recession-induced exports into the country.
7.       To regulate foreign companies: Exchange Control may also seek to regulate the business of foreign companies in the country. For instance, the FERA provided that non-residents, foreign national resident in India, companies (other than banking companies) incorporated abroad and having more than 40 per cent non-resident interest could not carry on in India, or establish a branch/office or other place of business in the country for carrying on any activity of a trading, commercial or industrial revenue, without the permission of the Reserve Bank of India.
8.       To regulate Export and Transfer of Securities: Exchange control may be employed also for the purpose of controlling the export and transfer of securities form the country. The FERA for instance, prohibited the sending or transferring of securities from the country to any place outside India, without the permission of the Reserve Bank of India.
9.       Facilitate Discrimination and Commercial Bargaining: Exchange control offers scope for discrimination between different countries. It would be used to accord exchange concessions, on a reciprocal basis, between different countries.
10.   Enable the Government to Repay Foreign Loans: The system of exchange control empowers the government to acquire foreign exchange from the residents of the country due to which it becomes easy for the government to repay foreign loans.
(b) Discuss the characteristics of India’s foreign trade in recent years.                     11
Ans: International Business: Business transaction taking place within the geographical boundaries of a nation is known as domestic or national business. It is also referred to as internal business or home trade. Manufacturing and trade beyond the boundaries of one’s own country is known as international business.
International or external business can, therefore, be defined as those business activities that take place across the national frontiers. It involves not only the international movements of goods and services, but also of capital, personnel, technology and intellectual property like patents, trademarks, know-how and copyrights.
In the words of Michael R. Czinkota ,” International business consists of transactions that are devised and carried out across national borders to satisfy the objectives of the individuals, companies and organisations. These transactions take on various forms which are often interrelated.”
In the words of John D. Daniels and Lee H. Radebaugh, “ International business is all business transactions — private and governmental — that involve two or more countries. Private companies undertake such transactions for profits; governments may or may not do the same in their transactions.”
The important features of international business are as follows:
a)      Large scale operation: In international business, all the operations are conducted on a very huge scale. Production International Business and marketing activities are conducted on a large scale. It first sells its goods in the local market. Then the surplus goods are exported.
b)      Integration of economies: International business integration (combines) the economies of many countries. This is because it uses finance from one country, labour from another country, and infrastructure from another country. It designs the product in one country, produces its part in many different countries and assembles the product in another country. It sells the product in many countries, i.e. in the international market.
c)       Dominated by developed countries and MNCs: International business is dominated by developed countries and Japan dominated (fully control) foreign trade. This is because they have large financial and other resources. They also have the best technology and research and development (R & D). They have highly skilled employees and managers because they give very high salaries and other benefits. Therefore, they produce good quality goods and services at low prices. This helps them to capture and dominate the world market.
d)      Benefits to participating countries: International business gives benefits to all participating countries. However, the developed (rich) countries get the maximum benefits. The developing (poor) countries also get benefits. They get foreign capital and technology. They get rapid industrial development of the developing countries. Therefore, developing countries open up their economies through liberal economic policies.
e)      Keen competition: International business has to face keen (too much) competition in the world market. The competition is between unequal partners i.e. developed and developing countries. In this keen competition, developed countries and their MNC s are in a favourable position because they produce superior quality goods and services at very low prices. Developed countries also have many contacts in the world market. So, developing countries find it very difficult to face competition from developed countries.
f)       Special role of science and technology: International business gives a lot of importance to science and technology. Science and Technology (S & T) help the business to have large-scale production. Developed countries use high technologies. Therefore, they dominate global business. International business helps them to transfer such top high-end technologies to the developing countries.
g)      International restrictions: International business faces many restrictions on the inflow and outflow of capital, technology and goods. Many governments do not allow international businesses to enter their countries. They have many trade block, tariff barriers, foreign exchange restrictions, etc. All this is harmful to international business.
h)      Sensitive nature: The international business is very sensitive in nature. Any changes in the economic policies, technology, political environment, has a huge impact on it. Therefore, international business must conduct marketing research to find out and study these changes. They must adjust their business activities and adapt accordingly to survive changes.

5. (a) What is deferred payment system? Explain the procedure of export under deferred payments. 3+8=11
Ans: Deferred Payment Scheme and Export under it
A deferred payment is an arrangement in which a debt does not have to be repaid until sometime in the future. The debt might be created when a person imported a good or service. The use of deferred payment plans is one of the more common sales and marketing tools used by companies. Essentially, the underlying concept is that importer can buy now and pay later. When an importer is unable to pay for the purchase right away but has a reasonable expectation of being able to provide payment in full by a certain date in the future, a deferred payment plan makes sense for both the consumer and the seller. Some companies offer these plans only to preferred customers, but others offer them to everyone.
In case of a foreign trade deferred payment means payment made by a buyer at a specified or determinable future date stipulated in the letter of credit or documentary collection, providing that the documents are found to be in order. An example is 60 days after date of transport document or invoice date. No draft is called for under this type of payment. It is important to remember that a buyer will have credit/collateral/cash tied up until payment is made; and if a deferred payment is made through a letter of credit, it is guaranteed to a seller just as if it were made immediately. The risk increases for a seller if the remitting bank is located in a risky country.
EXPORTS UNDER DEFERRED PAYMENTS: All export proceeds must be surrendered to an authorised dealer within 180 days from the date of shipment. Exporters are required to obtain permission from the Reserve Bank through authorised dealers in the event of non-realisation of export proceeds within the prescribed period. However, realising the special needs of exports of engineering goods and projects, Reserve Bank has formulated special schemes permitting deferred credit arrangements. This will enable realisation of export proceeds over a period exceeding six months. Hence, contracts for export of goods and services against payment to be secured partly or fully beyond 180 days are treated as deferred payment exports. The Credit Word is termed as deferred payment term credit. For financing under deferred credit system a single point approval mechanism within a three tier system operates.
This system includes:
i) Commercial banks who are authorised dealers in foreign exchange in India, can provide in principle clearance for contracts valued upto Rs.25 crores. They can avail refinance from EXIM bank.
ii) EXIM bank is empowered to give clearances for contracts of value of above Rs.25 crores and upto Rs. 100 crores.
iii) A working group considers proposals of contracts of value beyond Rs. 100 crores. The working group consists of representatives of all the above institutions to provide single window clearance.
Deferred credit facility is normally allowed only for export of engineering goods, turnkey projects involving rendering of services like designing, civil construction and erection and commissioning of plant or factory along with supply of machinery, equipment and materials. Project exports eligible for export finance are as follows:
i) Turnkey Projects: These projects involve supply of equipment along with related services like design, detailed engineering, civil construction, erection and commissioning of plants, etc.
ii) Construction projects involve civil works, steel structural works as well as associated supply of construction materials and equipment.
iii) Technical and consultancy service contracts involve provision of personnel, furnishing of knowhow, skills, operation and maintenance services and management contracts.
These services include:
a) Engineering services contracts involve supply of services such as design, erecting, commissioning or supervision of erector and commissioning.
b) Consultancy services contracts involve preparation of feasibility studies, project reports, preparation of designs and advice to the project authority on specifications for plants and equipments.
(b) Describe the role of Export-Import Bank of India.                                      11
Ans: Role of EXIM Bank: The Export-Import (EXIM) Bank of India is the principal financial institution in India for coordinating the working of institutions engaged in financing export and import trade. It is a statutory corporation wholly owned by the Government of India. It was established on January 1, 1982 for the purpose of financing, facilitating and promoting foreign trade of India. Export-Import Bank of India (Exim Bank) was set up by an Act of the Parliament “THE EXPORT-IMPORT BANK OF INDIA ACT, 1981” for providing financial assistance to exporters and importers, and for functioning as the principal financial institution for co-ordinating the working of institutions engaged in financing export and import of goods and services with a view to promoting the country’s international trade and for matters connected therewith or incidental thereto.
1. Lending Programme to Indian Exporters:
Ø  Supplier’s credit: This enables the exporters to extend credit to overseas importers of eligible Indian goods.
Ø  Finance for consultancy and technology services: This enables Indian exporters of consultancy and technology services to extend term credit to overseas importers.
Ø  Pre-shipment credit: This enables Indian exporters to buy raw materials and other inputs for fulfilling export contracts involving cycle time exceeding six months.
2. Finance for deemed exports:
Ø  Finance for EOU and EPZ Units.
Ø  Software Training Institutes.
Ø  Export marketing finance.
Ø  Export-Product Development Finance: these Indian firms to undertake product development, R & D for exports.
3. Services Offered to Indian Exporters:
Ø  Underwriting: This enables the Indian exporters to raise finance from capital markets with the backing of EXIM Bank’s underwriting commitment.
Ø  Forfeiting: This Indian exporters to convert sale to cash on without recourse basis.
Ø  Guarantee Facility: To execute export contracts and imports transactions.
Ø  Business Advisory and Technical assistance.
Ø  Cooperation arrangement with African Management Services.
4. For Commercial Banks:
Ø  Refinance of Export Credit.
Ø  Bulk import finance.
Ø  Guarantee cum Refinance supplier’s credit.
5. Other activities:
Ø  The bank helps Indian companies go global by setting up subsidiaries and joint ventures abroad.
Ø  It provides information to potential exporters about projects abroad specially about multilaterally agencies.
Ø  It also helps companies in preparing bids according to strict condition prescribed by the multilateral agencies.
Ø  It also entertains proposals for various facilities under he European Community Investment Partners like feasibility studies for setting up export units.
The bank introduced the “cluster of Excellence” programme for up gradation of quality standards and obtaining ISO certification.
Exim Bank has two broad business streams:
i) The traditional export finance typical of export credit agencies around the world
ii) Financing of export oriented units (export capability creation), which are non-traditional for export credit agencies.
Since inception, Exim Bank has been the principal financial institution in the country for financing project exports and exports on deferred credit terms. As per Memorandum of PEM (MEMORANDUM OF INSTRUCTIONS ON PROJECT EXPORTS AND SERVICE EXPORTS) of Reserve Bank of India, the following constitute project exports:
a)      Supply of goods / equipment on deferred payment terms
b)      Civil construction contracts
c)       Industrial turnkey projects
d)      Consultancy / services contracts
Exim Bank extends funded and non-funded facilities for overseas turnkey projects, civil construction contracts, technical and consultancy service contracts as well as supplies. Turnkey Projects are those which involve supply of equipment along with related services, like design, detailed engineering, civil construction, erection and commissioning of plants and power transmission & distribution
Construction Projects involve civil works, steel structural works, as well as associated supply of construction material and equipment for various infrastructure projects.
Technical and Consultancy Service contracts, involving provision of know-how, skills, personnel and training are categorized as consultancy projects. Typical examples of services contracts are: project implementation services, management contracts, supervision of erection of plants, CAD/ CAM solutions in software exports, finance and accounting systems.
Supplies: Supply contracts involve primarily export of capital goods and industrial manufactures. Typical examples of supply contracts are: supply of stainless steel slabs and ferro-chrome manufacturing equipments, diesel generators, pumps and compressors.
Exim Bank, under powers delegated vide the PEM, provides post-award clearance for project export contracts valued upto USD 100 million. Project export contracts valued above USD 100 million need to be provided post-award clearance by the inter-institutional Working Group.
In the case of very large value projects, officials of Ministry of Finance, Ministry of Commerce and Industry and Ministry of External Affairs, Government of India, are invited to participate in the Working Group Meetings.  In order to obtain immediate clarifications for speedy clearance of proposals by the Working Group, the exporters concerned and their bankers are also associated with the meetings.
With the same objective, participation of the main sub-suppliers, sub-contractors or other associates and their bankers in such meetings is also encouraged, particularly in respect of proposals for high value contracts.  Exim Bank also plays the role of a financier and provides funded and non-funded support for project export contracts of Indian Entities.
In addition to project exports, Exim Bank also extends fund-based and non-fund-based facilities to deemed export contracts as defined in Foreign Trade Policy of GOI, e.g., secured under funding from Multilateral Funding Agencies like the World Bank, Asian Development Bank, etc.; Contracts secured under International Competitive Bidding; Contracts under which payments are received in foreign  currency. Contracts in India categorized as Deemed Exports in the Foreign Trade Policy of India.
From the above discussion we can say that, the main role of Exim bank in foreign trade is to give credit facilities. Exim Bank extends Lines of Credit (LOC) to overseas financial institutions, regional development banks, sovereign governments and other entities overseas, to enable buyers in those countries, to import goods and services from India on deferred credit terms. The Indian exporters can obtain payment of eligible value from Exim Bank, without recourse to them, against negotiation of shipping documents. LOC is a financing mechanism that provides a safe mode of non-recourse financing option to Indian exporters, especially to SMEs, and serves as an effective market entry tool. Exim Bank extends LOC, on its own, as well as, at the behest of Government of India.

6. (a) What do you mean by Export processing Zone (EPZ)? Describe the benefits and facilities provided to such zones.                                                                 3+8=11
Ans: Export Processing Zones (EPZ)
Export Processing Zones in India was set up by the government of India with the aim to initiate infrastructural development and tax holidays in various industrial sectors in the country. EPZ has incessantly accelerated the economic growth of the country by ensuring a flourishing export production. The export processing zones in India came into existence soon after the political independence, when India proclaimed the first Industrial Policy Revolution in the year 1948. It was from then that the actual industrial growth begun in India, which resulted in the constitution of the export processing zones later. Export promotion has always been the chief concern of the government of India and it strictly follows the ISI policy while carrying out all its activities.
The main reasons behind setting up the EPZ in India have been listed as under:
Ø  Ensuring better infrastructural facilities in the industrial units that were set up in the export processing zones in India
Ø  Introducing the privilege of tax holidays
Ø  Establishing 100 percent export-oriented system in the EPZ in India
Ø  EPZ in India are entirely devoid of all kinds of duties, levies, and taxes
Ø  Implementing tax holidays in the importing of goods like capital goods, raw materials, and consumer goods as well.
Ø  The units in export processing zones follow the automatic route set by the government of India which offers 100 percent foreign direct investment in the zone
Ø  The rules set by the government of India are executed and implemented by the development commissioner of the respective export processing zones in India
Some of the significant features of the Export Processing Zones in India have been enumerated as under:
Ø  The activities that are carried out in the EPZ in India are not liable to be licensed apart from the IT enabled sectors
Ø  The units set up in the export processing zones in India can select their desired locations by following certain parameters as prescribed by the state governments
Ø  The export processing zones in India religiously follows the active export-import policy
Ø  The units in EPZ in India are totally custom bonded
Ø  The proposals for the units in Export processing zones in India are entitled to follow the automatic route for approval as enforced by the state governments
Ø  The proposals which do not fall under the procedure of automatic route system are governed or approved by the FIPB
Ø  The activities in EPZ in India belonging to the Domestic Tariff Area sector are converted into Export oriented units to meet the parameters set for the export production by the government
Ø  100 percent FDI is granted to these zones.
(b) Discuss the functions of Export Promotion Councils.                                                                 11
The Export Promotion Councils are established under the Companies Act 2013 to provide direct institutional support to the Indian exporters. The Government of India has created a separate export promotion council for every industry. Export Promotion Councils are the representative bodies of the various exporting industries. They serve as a bridge between the Government and exporters for export promotion and development. The exporters should register themselves with the respective export promotion councils and become the member of the councils. A nominal fee is charged by the export promotion council to issue membership certificate. This certificate is called Registration-cum-Membership Certificate (RCMC). This certificate is issued in terms of the EXIM policy. Export Promotion council helps the member-exporters on technical matters, export marketing strategies and export promotion. Experts are appointed in various working committees of the export promotion councils in order to help the exporters to solve various issues relating to international trade. The offices of the Indian Export Promotion Councils are established in foreign countries for the benefit of the Indian exporters. The export promotion council perform both advisory and executive functions.
Functions of the Export Promotion Councils: The important functions of the Export Promotion Councils are given below:
a)      Providing a forum between the Government and the members of the export promotion councils for consideration and early implementation of the export promotion schemes Sponsoring and inviting trade delegations and study teams for exploring export markets for the Indian industries
b)      Making arrangements for the distribution of scarce materials for export production
c)       Allocation of export quota for the export products like textiles
d)      Arranging Buyer-Seller Meets and trade fairs/exhibitions in India and abroad
e)      Foreign publicity for Indian products in overseas markets through the scheme like Joint Foreign Publicity
f)       Recommending the Government regarding the formulation and implementation of export incentive schemes like fixation of drawback rates, market development assistance etc.
g)      Creating export consciousness among the exporters
h)      Collecting and disseminating statistical information and market intelligence about the export opportunities through various media including newsletters, bulletins and other periodicals
i)        Coordinating with the export inspection council on quality control and preshipment inspection.
j)        Speedy disposal of export assistance applications and assisting small scale units to export their products
k)      Helping the member exporters in claiming various types of incentives from the Government and
l)        Keeping the member exporters informed with regard to trade enquiries and opportunities
7. (a) Discuss the main features of the current Foreign Investment Policy in India.                         11
(b) Discuss the significance of bilateral agreements in the context of India’s foreign trade.             11

0/Post a Comment/Comments

Kindly give your valuable feedback to improve this website.