Why there is Need of Export and Import Policy in India?

Before discussing the need for export and import it is necessary to first understand the meaning of export and import.

Export means “To send goods or services across national frontiers for the purpose of selling and realizing foreign exchange.”(1) Import means “a good or service brought into one country from another.” Exports & Imports form the backbone of international trade. The higher the value of imports entering a country, compared to the value of exports, the more negative that country’s balance of trade becomes.(2)

Why there is Need of Export?

As we know that whole world was rushing towards globalization and integration. Earlier India had not joined the race, which resulted that the economic scenario had worsened the development. At that point of time the only recourse left to India was to increase its exports to tide over the ever-increasing imports. After that India aimed to gain a considerable proportion of international business and make its presence felt on the international front. The Government announced various export promotion measures and incentives. Laws were framed to streamline the process of export and import. These laws ensured that our commitment to expansion of India’s trade remained firm. The laws and facilitation announced by the Government were not only related to export and import of goods and services, but were also directed to up gradation of technology and integration of all the departments by using latest technologies available. As we can see, e-commerce plays a very significant role in today’s trade.

The Export and Import Policy or the EXIM Policy, 1992-97 was a significant landmark in India’s economic history. For the first time, conscious effort was made to dismantle various protectionist and regulatory policies and accelerate the country’s transition towards a globally oriented economy.(3)

In the era of globalization and WTO regime, many Asian countries have achieved such remarkable export-led growth that South Korea and Taiwan are likely to be considered as developed countries by WTO. WTO is the largest body of world trade consisting of 163 member countries as on date and responsible for 96% of the world trade. It is necessary for any developing country to expand exports continuously because export growth ultimately results in creation of jobs, building up of infrastructure, economies of scale and added foreign exchange earnings. Today’s world is economic in nature and increased exports give credibility to the standing of the country in overseas market. Exports, therefore, are of importance and are considered a national priority by the Government of India.(4)

Why there is Need of Import?

As in today’s perspective there is lots of competition and because of tough competition, one country can sell only if the quality of your product is better than that of your competitors, the price most competitive and the buyers get delivery on time. In order to achieve all this, one needs to have access to international standard quality materials and capital goods.

By accepting membership of the World Trade Organization (WTO), India has become a part of the global village. New trade blocks are emerging and new world order is getting established. Regional trading arrangements (RTAs) were mushrooming and even India is negotiating bilateral agreements with various countries and regional groupings.

The area in which the imports are almost essential are defence requirements, crude oil, fertilizers, capital goods, industrial inputs like raw materials, components, consumables, spares, etc., import of samples, import of technology, import of drawing and designs, import of services etc.

Objectives of Export Import Policy:

(1). To derive maximum benefit from expanding global opportunity.

(2). To enhance economic growth by provide raw material, intermediates, consumable and capital good for production.

(3). To enhance technological strength and efficiency or Indian agriculture, industry and service.

(4). To provide consumers with goods quality product at reasonable prices.

(5). To simplify the procedural formalities and follow the expanding freely importable list.

Export & Import Policy in India:

India’s import and export system is governed by the Foreign Trade (Development & Regulation) Act of 1992 and India’s Export Import (EXIM) Policy. Imports and exports of all goods are free, except for the items regulated by the EXIM policy or any other law currently in force. Registration with regional licensing authority is a prerequisite for the import and export of goods. The customs will not allow for clearance of goods unless the importer has obtained an Import Export Code (IEC) from the regional authority.(5)

Import Policy:

The Indian Trade Classification (ITC)-Harmonized System (HS) classifies goods into three categories:

  1. Restricted
  2. Canalized
  3. Prohibited

Goods not specified in the above mentioned categories can be freely imported without any restriction, if the importer has obtained a valid IEC. There is no need to obtain any import license or permission to import such goods. Most of the goods can be freely imported in India.

(1). Restricted Goods:

Restricted goods can be imported only after obtaining an import license from the relevant regional licensing authority. The goods covered by the license shall be disposed of in the manner specified by the license authority, which should be clearly indicated in the license itself. The list of restricted goods is provided in ITC (HS). An import license is valid for 24 months for capital goods, and 18 months for all other goods.(6)

 (2). Canalized Goods:

Canalized goods are items which may only be imported using specific procedures or methods of transport. The list of canalized goods can be found in the ITC (HS). Goods in this category can be imported only through canalizing agencies. The main canalized items are currently petroleum products, bulk agricultural products, such as grains and vegetable oils, and some pharmaceutical products.

(3). Prohibited Goods:

These are the goods listed in ITC (HS) which are strictly prohibited on all import channels in India. These include wild animals, tallow fat and oils of animal origin, animal rennet, and unprocessed ivory.

Export Policy:

Just like imports, goods can be exported freely if they are not mentioned in the classification of ITC (HS). Below follows the classification of goods for export:

  1. Restricted
  2. Prohibited
  3. State Trading Enterprise

(1). Restricted Goods:

Before exporting any restricted goods, the exporter must first obtain a license explicitly permitting the exporter to do so. The restricted goods must be exported through a set of procedures/conditions, which are detailed in the license.

(2). Prohibited Goods:

These are the items which cannot be exported at all. The vast majority of these include wild animals, and animal articles that may carry a risk of infection.

(3). State Trading Enterprise (STE):

Certain items can be exported only through designated STEs. The export of such items is subject to the conditions specified in the EXIM policy.


(1) Meaning of the term  “Export”, available at: http://www.businessdictionary.com/definition/export.html,(last access on 20/03/2015)

(2) Hand Book on Foreign Trade Policy and Guide to Export & Import, The Institute of Chartered Accountants of India, Chapter 1 HISTORY OF FOREIGN TRADE at pg 2, available at: http://nbaindia.org/uploaded/Biodiversityindia/Legal/6.%20Import%20and%20Export%20(Control)%20Act,%201947.pdf, (last access on 22/03/2015)

(3) India EXIM policy- Foreign Trade Policy, available at: http://www.exim-policy.com/, (last access on 22/03/2015)

(4) Hand Book on Foreign Trade Policy and Guide to Export & Import, The Institute of Chartered Accountants of India, Chapter 1 HISTORY OF FOREIGN TRADE at pg 2, available at: http://nbaindia.org/uploaded/Biodiversityindia/Legal/6.%20Import%20and%20Export%20(Control)%20Act,%201947.pdf, (last access on 22/03/2015)

(5) Import and Export Licensing Procedures in India, available at < http://www.india-briefing.com/news/import-export-licensing-procedures-india-6804.html/#sthash.1xHyiS3G.dpuf

(6) India’s Import Policy: Procedures and Duties, available at http://www.india-briefing.com/news/import-policy-procedures-duties-8728.html/


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