Foreign Trade Policy 2006-07




For India to become a major player in world trade, an all encompassing, comprehensive view needs to be taken for the overall development of the country's foreign trade. While increase in exports is of vital importance, we have also to facilitate those imports which are required to stimulate our economy. Coherence and consistency among trade and other economic policies is important for maximizing the contribution of such policies to development. Thus, while incorporating the existing practice of enunciating an annual Exim Policy, it is necessary to go much beyond and take an integrated approach to the developmental requirements of India's foreign trade. This is the context of the new Foreign Trade Policy.


Trade is not an end in itself, but a means to economic growth and national development. The primary purpose is not the mere earning of foreign exchange, but the stimulation of greater economic activity. The Foreign Trade Policy is rooted in this belief and built around two major objectives. These are:

(i) To double our percentage share of global merchandise trade within the next five years; and

(ii) To act as an effective instrument of economic growth by giving a thrust to employment generation.


These objectives are proposed to be achieved by adopting, among others, the following strategies:

(i) Unshackling of controls and creating an atmosphere of trust and transparency to unleash the innate entrepreneurship of our businessmen, industrialists and traders.

(ii) Simplifying procedures and bringing down transaction costs.

(iii) Neutralizing incidence of all levies and duties on inputs used in export products, based on the fundamental principle that duties and levies should not be exported.

(iv) Facilitating development of India as a global hub for manufacturing, trading and services.

(v) Identifying and nurturing special focus areas which would generate additional employment opportunities, particularly in semi-urban and rural areas, and developing a series of 'Initiatives' for each of these.

(vi) Facilitating technological and infrastructural upgradation of all the sectors of the Indian economy, especially through import of capital goods and equipment, thereby increasing value addition and productivity, while attaining internationally accepted standards of quality.

(vii) Avoiding inverted duty structures and ensuring that our domestic sectors are not disadvantaged in the Free Trade Agreements/Regional Trade Agreements/Preferential Trade Agreements that we enter into in order to enhance our exports.

(viii) Upgrading our infrastructural network, both physical and virtual, related to the entire Foreign Trade chain, to international standards.

(ix) Revitalising the Board of Trade by redefining its role, giving it due recognition and inducting experts on Trade Policy.

(x) Activating our Embassies as key players in our export strategy and linking our Commercial Wings abroad through an electronic platform for real time trade intelligence and enquiry dissemination.


The new Policy envisages merchant exporters and manufacturer exporters, business and industry as partners of Government in the achievement of its stated objectives and goals. Prolonged and unnecessary litigation vitiates the premise of partnership. In order to obviate the need for litigation and nurture a constructive and conducive atmosphere, a suitable Grievance Redressal Mechanism will be established which, it is hoped, would substantially reduce litigation and further a relationship of partnership.

The dynamics of a liberalized trading system sometimes results in injury caused to domestic industry on account of dumping. When this happens, effective measures to redress such injury will be taken.


This Policy is essentially a roadmap for the development of India's foreign trade. It contains the basic principles and points the direction in which we propose to go. By virtue of its very dynamics, a trade policy cannot be fully comprehensive in all its details. It would naturally require modification from time to time. We propose to do this through continuous updation, based on the inevitable changing dynamics of international trade. It is in partnership with business and industry that we propose to erect milestones on this roadmap.





31st AUGUST, 2004



Preamble 1.1 The Preamble spells out the broad framework and is an integral part of the Foreign Trade Policy.
Duration 1.2 In exercise of the powers conferred under Section 5 of The Foreign Trade (Development and Regulation Act), 1992 (No. 22 of 1992), the Central Government hereby notifies the Foreign Trade Policy for the period 2004-2009 incorporating the Export and Import Policy for the period 2002-2007, as modified. This Policy shall come into force with effect from 1st September 2004 and shall remain in force upto 31st March, 2009 unless as otherwise specified.
Amendments 1.3 The Central Government reserves the right in public interest to make any amendments to this Policy in exercise of the powers conferred by Section-5 of the Act. Such amendment shall be made by means of a Notification published in the Gazette of India.
Transitional Arrangements 1.4 Any Notifications made or Public Notices issued or anything done under the previous Export/ Import policies, and in force immediately before the commencement of this Policy shall, in so far as they are not inconsistent with the provisions of this Policy, continue to be in force and shall be deemed to have been made, issued or done under this Policy.
Authorisations, certificates and permissions issued before the commencement of this Policy shall continue to be valid for the purpose and duration for which such Authorisation, certificate or permission was issued, unless otherwise stipulated.
1.5 In case an export or import that is permitted freely under this Policy is subsequently subjected to any restriction or regulation, such export or import will ordinarily be permitted notwithstanding such restriction or regulation, unless otherwise stipulated, provided that the shipment of the export or import is made within the original validity of an irrevocable letter of credit established before the date of imposition of such restriction.



Special Focus Initiatives 1B.1 With a view to doubling our percentage share of global trade within 5 years and expanding employment opportunities, especially in semi urban and rural areas, certain special focus initiatives have been identified for the agriculture, handlooms, handicraft, gems & jewellery, leather and Marine sectors.
Government of India shall make concerted efforts to promote exports in these sectors by specific sectoral strategies that shall be notified from time to time.
New Sectoral Initiatives to be announced Further Sectoral Initiatives in other sectors will also be announced from time to time.
For the present, the thrust sectors indicated below shall be extended the following facilities:
(i) Agriculture and Village Industry
(a) A new scheme called the Vishesh Krishi and Gram Udyog Yojana (Special Agricultural and Village Industry Scheme) for promoting export of fruits, Vegetables, Flowers, Minor Forest produce, Dairy, Poultry and their value added products and Gram Udyog products has been introduced (Para 3.8).
(b) Funds shall be earmarked under ASIDE for development of Agri Export Zones (AEZ)
(c) Deleted.
(d) Deleted.
(e) Capital goods imported under EPCG shall be permitted to be installed anywhere in the AEZ.
(f) Import of restricted items, such as panels, shall be allowed under the various export promotion schemes.
(g) Import of inputs such as pesticides shall be permitted under the Advance Authorisation for agro exports.
(h) New towns of export excellence with a threshold limit of Rs 250 crore shall be notified.
(ii) Handlooms:
(a) Specific funds would be earmarked under MAI/ MDA Scheme for promoting handloom exports.
(b) Duty free import entitlement of specified trimmings and embellishments shall be 5% of FOB value of exports during the previous financial year.
(c) Duty free import entitlement of hand knotted carpet samples shall be 1% of FOB value of exports during the previous financial year.
(d) Duty free import of old pieces of hand knotted carpets on consignment basis for re-export after repair shall be permitted.
(e) New towns of export excellence with a threshold limit of Rs 250 crore shall be notified.
(f) Government has decided to develop a trade mark for Handloom on lines similar to 'Woolmark' and 'Silkmark'. This will enable handloom products to develop a niche market with a distinct identity.
(iii) Handicrafts:
(a) New Handicraft SEZs shall be established which would procure products from the cottage sector and do the finishing for exports.
(b) Duty free import entitlement of trimmings and embellishments shall be 5% of the FOB value of exports during the previous financial year. The entitlement is broad banded, and shall extend also to merchant exporters tied up with supporting manufacturers.
(c) The Handicraft Export Promotion Council shall be authorized to import trimmings, embellishments and consumables on behalf of those exporters for whom directly importing may not be viable.
(d) Specific funds would be earmarked under MAI & MDA Schemes for promoting Handicraft exports.
(e) CVD is exempted on duty free import of trimmings, embellishments and consumables.
(f) New towns of export excellence with a reduced threshold limit of Rs 250 crore shall be notified.

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