FOREIGN TRADE POLICY OF INDIA

FOREIGN TRADE POLICY OF INDIA

To become a major player in world trade, a comprehensive approach needs to be taken through the Foreign Trade Policy of India. Thus, while incorporating the new Foreign Trade Policy of India, the past policies should also be integrated to allow developmental scope of India’s foreign trade. This is the main mantra of the Foreign Trade Policy of India.

OBJECTIVES

The policy sets out the core objectives, identifies key strategies, spells out focus initiatives, outlines export incentives, and also addresses issues concerning institutional support including simplification of procedures relating to export activities.

To double the percentage share of global merchandise trade within the next five years.

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

STRATEGY

Removing government controls and creating an atmosphere of trust and transparency to promote entrepreneurship, industrialization and trades.

Simplification of commercial and legal procedures and bringing down transaction costs. 

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

Facilitating technological and infrastructural upgradation of all the sectors of the Indian economy, especially through imports and thereby increasing value addition and productivity, while attaining global standards of quality.

Generating additional employment opportunities, particularly in semi-urban and rural areas, and developing a series of ‘Initiatives’ for each of these sectors

Free Trade Agreements / Regional Trade Agreements / Preferential Trade Agreements that India enters into in order to enhance exports

 FOREIGN TRADE DEVELOPMENT  & REGULATION ACT-1992

The Act provides for the development and regulation of foreign trade by facilitating imports into, and augmenting exports from, India and for matters connected therewith or incidental thereto.

As per the provisions of the Act, the Govt:

• may make provisions for facilitating and controlling foreign trade.
• may make provisions for facilitating and controlling foreign trade.
• may make provisions for facilitating and controlling foreign trade.
• may make provisions for facilitating and controlling foreign trade.

HIGHLIGHTS OF FOREIGN TRADE POLICY 2009-14

• Higher Support for Market and Product Diversification 
• Technological Upgradation
• Simplification of Procedures 
•  Reduction of Transaction Costs 
•  Thrust to ValueAdded Manufacturing 
• Status Holders

Under the present Foreign Trade Policy, Government recognizes exporters based on their export performance and they are called ‘status holders’. For technological upgradation of the export sector, these status holders will be permitted to import capital goods duty free of specified product groups. This will help them to upgrade their technology and reduce cost of production. For upgradation of export sector infrastructure, ‘Towns of Export Excellence’ and units located therein would be granted additional focused support and incentives.

REASONS FOR TRADE POLICY REQUIREMENT

• To have favorable balance of payments and increase in foreign exchange reserves. 
• To protect domestic industries from the competition from rest of the world
• To encourage import substitution . 
• The  encourage exports and for export promotion. 
• To keep foreign exchange reserves up to a reasonable extent.
• To develop economy of India.
  

THRUST SECTORS

• Agricultural
• Handicrafts 
• Handlooms 
•  Gems and Jewellery 
• Leather 
• Textile

CAPITAL MARKET

 CAPITAL MARKET

   A capital market may be defined as an organised mechanism meant for the effective and smooth transfer of money capital or financial resources from the investors to the entrepreneurs. Capital market deals with long term funds whereas people who borrow and lend money for periods exceeding one year and they mostly buy and sell corporate securities.

Components of Capital Market

 The capital market consist of a no of individuals and institutions that canalize the supply and demand for long term capital claims on capital. The stock exchanges, commercial banks, co-operative banks , development bank, insurance company, investment companies are the important components of capital market. 

Functions of Capital Market

—It mobilises the financial resources on a nation wide scale.

—It secures the much required foreign capital and know-how to promote economic growth at a faster rate.

—It ensures most effective allocation of mobilised financial resources.

—A developed capital market provide a no of profitable investment opportunities for the small savers. 

INDIAN CAPITAL MARKET

 The capital market in India may be broadly classified into organized and unorganized markets. The organized capital market consist of the corporate enterprises, government and semi government institutions. The unorganized sector of the capital market consists of indigenous bankers in urban areas and money lenders in rural areas. 

Structure

  The capital market in India consists of the primary markets and the secondary markets  .The primary market creates long term instruments which corporate entities borrow from the capital market.

             Secondary market is the one which provides liquidity & marketability to these instruments.

Source of supply & demand of funds

  The capital market consists of the lenders and borrowers .The supply  of funds come from the lenders & the demand for funds come from the investors. Supply of long term  funds  come from the investing public from their savings. These savings from the following

—Household savings

—Foreign capital

—Corporate savings

—Institutional investors

—The government 

The capital market serves a very useful purpose for pooling the capital resources and making the available to the enterprising investors. Capital market consist of a no of individuals and institutions that channelize the supply and demand for long term capital & claims on capital.

BOMBAY STOCK EXCHANGE

BOMBAY STOCK EXCHANGE

Bombay stock exchange was established as the “Native share and stock broker’s Association” through the presidency of Bombay with the approval of the central government. The management of BSE is vested on a Governing Board comprising of Nine elected directors, an executive, three government nominees, one RBI nomine and five public nominees. Bombay stock Exchange in the oldest stock exchange in India. It started trading in shares in the year 1875 and since then it has been the forerunner of the secondary market in India. 

BSE limited has two segments. 

1. Capital market segment. 

2. Derivative market segment.

OBJECTIVES OF BSE 

The major objectives of BSE are the following. 

1. To safeguard the interest of the investing public. 

2. To establish and promote honest and just practices in security transactions. 

3. To promote, develop and maintain a well regulated market for dealing in securities. 

4. To promote industrial development in the country through efficient resource mobilization by way of investment in corporate securities .

CAPITAL REQUIREMENTS

The capital requirement of BSE are

1. The minimum issued equity capital of Rs.3 crores. 

2. Profitability record of at least THREE years. 

3. The minimum market capitalization of Rs. 20 crose (based pm Average size) for the last six months. 

4. Trading for a minimum of 50% of the total trading days during the same six months on any exchange. 

5. The minimum average volume traded per day during the last three completed months should be 500 shares and at least five trades per day.

TRADING SYSTEM 

The Bombay stock Exchange computerized its trading system by introducing Bombay On line Trading (BOLT) on 14th March,1995.

It serves Two purposes 

1. It allows retention and matching of orders against one another where no quotes exist  in the system for particular scrip and

2. It improves the price competitive character of the market, in case investors are willing to deal at prices better than the current best quotes. 

At the Bombay stock Exchange, trading takes place in groups. The scrip traded on the exchange have been classified into A,B,B1,B2,C,F,G,T & Z groups. 

The categories of securities traded under the group are 

1. Group A – Specified shares. 

2. Group B – Non specified shares 

3. Group C – odd lots and permitted shares

4. Group F – Debit market. 

5. Group G – Government securities 

6. Group Z – List of companies which have failed to comply with listing requirement and /or failed to resolve investor complaints. 

Besides the exchange also has another segment called the “Trade to Trade” category that has been shifted to “T” group. It was created as a preventive surveillance measure to ensure market safety and integrity.

BSE is a witness to continuous rise and fall in share prices over all these years. It has taken number of steps to develop and strengthen the secondary capital market. The trading system has gradually shifted from traditional system to computerized on-line system.