MODULE 2- ECONOMIC ENVIRONMENT

Module 2 - Economic Environment

Meaning – Characteristics of Indian Economy – Features affecting

Economy – Impact of Liberalization Privatization & Globalization of
Indian Business
Monetary policy – Meaning, objectives
Fiscal policy – Meaning, objectives, budget, and its importance
EXIM policy – Meaning, objectives Industrial policy – Meaning,
objectives - Latest Policy Measures

ECONOMIC ENVIRONMENT
Economic Environment includes the economic factors that have effects on the
functioning of the business unit. It includes the policies and nature of an
economy, trade cycles, economic resources, level of income, distribution of
income and wealth. Business depends on the economic environment for all the
needed inputs, as well as to sell the finished goods.
The dependence of any business on economic environment is total and it’s
rightly said that business is the part of the total economy.

MEANING OF INDIAN ECONOMY:

India is a developing nation and economy, including a blended economy on the
planet. The significant attributes of a developing economy are overpopulation,
the most extreme populace underneath the destitute or poverty line, a poor
infrastructure, an agro-based economy, a slower pace of capital development,
and low per capita income. Since the freedom of the country, India has been
creating numerous viewpoints according to the monetary perspective. Albeit the
Indian economy is in the developing stage, it will gradually move to become a
developed nation. The significant changes in the Indian economy were made in
the year 1991.
CHARACTERISTICS OF THE INDIAN ECONOMY:
The Indian economy, currently in a developing stage, is grappling with major
challenges like illiteracy, unemployment, and poverty. Characteristics of the
Indian economy.
1. Low Per Capita Real Income: Real income refers to the country's overall
purchasing power in a given financial year. Per capita real income, on the
other hand, denotes the average individual's purchasing power.
Developing nations often have a low per capita real income.

2. Rapid Population Growth: A high population requires a robust

infrastructure, including adequate educational and medical facilities and
 ample employment opportunities with decent wages. However, providing
these resources to each citizen becomes challenging with a rapidly
growing population, often leaving the government struggling to keep up.
This factor contributes to India's status as a developing economy.

3. The Vicious Circle of Poverty: The vicious circle of poverty affects both the
supply and demand side. On the supply side, the lack of capital leads to
low rates on investments, resulting in a low level of per capita real income.
On the demand side, when the country's real income is low, goods and
services become expensive, leading to a vicious circle of poverty - a
common phenomenon in developing economies.

4. Predominantly Agro-Based Economy: Agriculture and allied sectors

contribute significantly to India's GDP and employ a large portion of the
country's population, making India primarily an agro-based economy.

5. Income Disparities: One of the major concerns in the Indian economy is

the concentration of wealth. Recent reports suggest that a small
percentage of Indians hold a significant portion of the country's wealth,
leading to stark income disparities.

6. Decline in Capital Formation: Capital formation is the net accumulation of

capital goods, such as equipment, tools, transportation asset, and
electricity, during an accounting period for a particular country. The rate
of capital formation in India has seen a significant decline, affecting the
overall income levels.

7. Insufficient Infrastructure Development: Many Indian households lack

basic amenities such as electricity and safe drinking water. The country
requires substantial investment to address these infrastructure
shortcomings.

8. Imperfect Market: The Indian markets are imperfect due to the lack of
mobility from one place to another, leading to inefficient resource
utilization and price fluctuations.

9. Outdated Technology: Indian industries primarily rely on labour-intensive

methods due to the lack of advanced technology and machinery.

10.Traditional Society: Indian society is often hindered by issues such as

communalism, patriarchy, superstitions, and the caste system. These
factors significantly impede the growth of the Indian economy.
Despite a few negative perspectives, there are some sure things in the Indian
economy. Different plans of the government have supported the Indian economy
in numerous ways. India is driving towards superior financial construction with
the assistance of ‘Digital India’, ‘Make in India’, and so forth.
LIBERALIZATION
Liberalization is the easing of government rules and restrictions of local trades
and businesses. Liberalization allows local businesses to grow freely and more
profits. In general, liberalization refers to a relaxation of previous government
restrictions, usually in areas of social or economic policy.
If restrictions are imposed on economic activities by government policies, the
regime may be said to be following a RESTRICTIVE POLICY. By contrast, if the
government has put no restrictions, then it is a policy of LAISSEZ-FAIRE.
However, no economy has come across complete freedom, only some
restrictions are removed or slackened, this regime is known as Liberalization.

IMPACT OF LIBERALIZATION
The restrictive policies of our country had resulted in the slow growth of the
industry and economy. There was lack of competition causing lack of choice,
high prices poor quality, lack of innovation , etc. As a result of liberalization, the
investment has been picking up as well as the economic growth.
1. Private and foreign investments: Domestic savings were not sufficient
in the country, liberalization had the effect of boosting FDI and FII.
Liberalization has given an enormous boost to the private and foreign
investments in the industrial sector

2. Increased turnover: Several industries were witnessing huge increase in

their output. The industries with the increase in the output were luxurious
goods e.g., motor cars, colour TV etc.

3. Improved competition and internationalization: Companies became

stronger and more competitive both in national as well as international
markets

4. Free determination of interest rate by the commercial Banks:

Under the policy of liberalization interest rate of the banking system will
not be determined by RBI rather all commercial Banks are independent to
determine the rate of interest.

5. Increase in the investment limit for the Small-Scale Industries

(SSIs): Investment limit of the small-scale industries has been raised to
Rs. 1 crore. So, these companies can upgrade their machinery and
improve their efficiency.

6. Freedom to import capital goods: Indian industries will be free to buy

machines and raw materials from foreign countries to do their holistic
development.

7. Freedom for expansion and production to Industries: In this new

liberalized era now, the industries are free to diversify their production
capacities and reduce the cost of production. Earlier government used to
 fix the maximum limit of production capacity. No industry could produce
beyond that limit. Now the industries are free to decide their production by
their own based on the requirement of the markets.

8. Abolition of Restrictive Trade Practices: According to Monopolies and

Restrictive Trade Practices (MRTP) Act 1969, all those companies having
assets worth Rs. 100 crore or more were called MRTP firms and were
subjected to several restrictions. Now these firms have not to obtain prior
approval of the Govt. for taking investment decision. Now MRTP Act is
replaced by the competition Act, 2002.

PRIVATIZATION
This is nothing but the phrase “Government has no business to do business.”
The process of transforming ownership of business enterprise from the public
sector to the private sector, which may also include non-profit organisations, is
known as Privatization.

IMPACT OF PRIVATIZATION
1. Increase in efficiency and Profitability: Most Govt. industries and
services are inefficient and running in losses, when these will be
transferred to private sector, their administration will improve and non-
development expenditures will be reduced, their efficiency will increase
and will be converted into profitable ventures.

2. Increase in Foreign Investment and Export Earnings: Privatization

will increase foreign investment when foreigners will purchase them. Their
production will increase which will lead to more foreign exchange and if
these enterprises are set up by foreign loans, these loans will be repaid
out of the sale proceeds, which will reduce the burden of foreign loans.

3. Decrease in Political Pressure: There are always political pressures on

government owned industries, banks and other institutions for
employment of political workers and loan facilities from banks. When
these enterprises will go in the hands of private owners then these illegal
pressures will be reduced to a great extent.

4. Use of Latest Technology and Know-How: Private domestic investors

and foreign investors will adopt latest technology and know-how for the
increase in output and their profits. This will result in the increase in
national product, thus national income of the country will grow

5. Decrease in Deficit Budgeting and Increase in Infrastructure: Govt.

enterprises usually run into losses and to keep them going. Govt. provides
funds every year. After privation, Govt. need not to resort to deficit
financing and the funds provided to these enterprises will be utilized for
construction of social infrastructure of the economy.
 6. Increase Innovation: Private management can significantly lower
operating costs through the use of more flexible personnel practices, job
categories, streamlined operating procedures, and simplified procurement.
Private ownership can stimulate innovation. Competition forces private
firms to develop innovative, efficient methods for providing goods and
services in order to keep costs down and keep contracts. These incentives,
for the most part, do not exist in the public sector.

7. Allow Policymakers To Steer, Rather Than Row: Privatization allows

state officials to spend less time managing personnel and maintaining
equipment, thus allowing more time to see that essential services are
efficiently delivered. It helps the policy makers to have a direction.

8. Improved Maintenance: Private owners are strongly motivated to keep

up maintenance in order to preserve the asset value of the investment in
the facility. Public owners often defer maintenance due to political
considerations, increasing overall long-term costs.

9. Increase in Tax Evasion: Private sector generally tries to avoid payment

of taxes. Thus privatization of enterprises will result in the decrease of tax
income.

10. Concentration of Wealth: Privatization of large industrial units

and services sector such as banks and insurance companies will increase
concentration of wealth in private hands. It means only rich people will
reap the fruits of industrialization and the society will be divided between
“haves and have-nots”.

11. Exploitation by Private Sector: Privatization will result in

exploitation by rich people. They may charge more prices for their goods
and services. They may terminate workers to reduce cost of production.
Thus different types of exploitation may be started and the concept of
welfare state will be jeopardized.

12. National Security Endangered: Telecommunication, Civil

Aviation (Airlines) and railways if privatized then it would be a security risk
for the country.

13. Job losses: Privatisation forces the new private companies to be

efficient, or at least find some way of reducing their costs in order to make
a profit given the strict pricing formulae used by the regulators. By far the
most popular way of cutting costs for these firms was to shed labour in
large quantities.

NOTE: GLOBALIZATION IS COVERED IN THE MODULE 3

MONETARY POLICY
Monetary policy is adopted by the monetary authority of a country that controls
either the interest rate payable on very short-term borrowing or the money
supply. The policy often targets inflation or interest rate to ensure price stability
and generate trust in the currency. The monetary policy in India is carried out
under the authority of the Reserve Bank of India.
OBJECTIVES OF MONETARY POLICY
1. Promotion of saving and investment: Since the monetary policy
controls the rate of interest and inflation within the country, it can impact
the savings and investment of the people. A higher rate of interest
translates to a greater chance of investment and savings, thereby,
maintaining a healthy cash flow within the economy.
2. Controlling the imports and exports: By helping industries secure a
loan at a reduced rate of interest, monetary policy helps export-oriented
units to substitute imports and increase exports. This, in turn, helps
improve the condition of the balance of payments.
3. Managing business cycles: The two main stages of a business cycle are
boom and depression. The monetary policy is the greatest tool using
which the boom and depression of business cycles can be controlled by
managing the credit to control the supply of money. The inflation in the
market can be controlled by reducing the supply of money. On the other
hand, when the money supply increases, the demand in the economy will
also witness a rise.
4. Regulation of aggregate demand: Since the monetary policy can
control the demand in an economy, it can be used by monetary authorities
to maintain a balance between demand and supply of goods and services.
When credit is expanded and the rate of interest is reduced, it
allows more people to secure loans for the purchase of goods and
services. This leads to the rise in demand. On the other hand,
when the authorities wish to reduce demand, they can reduce
credit and raise the interest rates.
5. Generation of employment: As the monetary policy can reduce the
interest rate, small and medium enterprises (SMEs) can easily secure a
loan for business expansion. This can lead to greater employment
opportunities.
6. Helping with the development of infrastructure: The monetary
policy allows concessional funding for the development of infrastructure
within the country.
7. Allocating more credit for the priority segments: Under the
monetary policy, additional funds are allocated at lower rates of interest
for the development of the priority sectors such as small-scale industries,
agriculture, underdeveloped sections of the society, etc.
8. Managing and developing the banking sector: The entire banking
industry is managed by the Reserve Bank of India (RBI). While RBI aims to
make banking facilities available far and wide across the nation, it also
instructs other banks using the monetary policy to establish rural branches
wherever necessary for agricultural development. Additionally, the
government has also set up regional rural banks and cooperative banks to
help farmers receive the financial aid they require in no time.
INSTRUMENTS OF MONETARY POLICY
1. Open Market Operations: An open market operation is an instrument
which involves buying/selling of securities like government bond from or to
the public and banks. The RBI sells government securities to control the
flow of credit and buys government securities to increase credit flow.
2. Cash Reserve Ratio (CRR): CRR) - Banks are required to set aside this
portion in cash with the RBI. The bank can neither lend it to anyone nor
can it earn any interest rate or profit on CRR. Current CRR 4.5%.
3. Statutory Liquidity Ratio (SLR): Banks are required to set aside this
portion in liquid assets such as gold or RBI approved securities such as
government securities. Banks are allowed to earn interest on these
securities, however it is very low. As of now, SLR stands at 18%.
4. Bank Rate Policy: Also known as the discount rate, bank rates are
interest charged by the RBI for providing funds and loans to the banking
system. An increase in bank rate increases the cost of borrowing by
commercial banks which results in the reduction in credit volume to the
banks and hence the supply of money declines. An increase in the bank
rate is the symbol of the tightening of the RBI monetary policy. As of 2024,
the bank rate is 6.75%.
5. Credit Ceiling: With this instrument, RBI issues prior information or
direction that loans to the commercial bank will be given up to a certain
limit. In this case, a commercial bank will be tight in advancing loans to
the public. They will allocate loans to limited sectors. A few examples of
credit ceiling are agriculture sector advances and priority sector lending
6. Repo rate: Repo rate is the rate at which banks borrow from RBI on a
short-term basis against a repurchase agreement. Under this policy, banks
are required to provide government securities as collateral and later buy
them back after a pre-defined time.
7. Reverse Repo rate: It is the reverse of repo rate, i.e., this is the rate RBI
pays to banks in order to keep additional funds in RBI. It is linked to repo
rate in the following way: Reverse Repo Rate = Repo Rate – 1

FISCAL POLICY
Fiscal policy refers to the governing bodies spending and taxation to influence
the economic conditions, mainly the macroeconomic condition. It includes
employment, inflation, aggregate demand for goods and services and economic
growth. The question is how much income it receives through taxes and how
much it is spent on defence, welfare, and education.
Although, the concept even contracts with monetary policy regulated by the
central bankers influencing the quantity of money and credit in an economy.
Both the concepts are helpful to accelerate growth when an economy begins to
moderate growth. In addition, fiscal policy is also helpful in redistributing income
and health.
A government has several fiscal policy objectives in mind when making
decisions. Some governments may favour an objective over the other one. Below
are the five main objectives of the fiscal policy.
 1. Economic growth: As an economy develops, its citizens become
flourishing overall. Also, the economy’s government should be careful, as
a violent fiscal policy may turn destructive in the long run. (Increase in
aggregate production and rise in national income)
2. Full employment: It is the primary objective of a government to get
people into work. Not only do the higher taxes benefit the governments,
but also the lower expenditures on social security. Although, an
expansionary policy may invest in infrastructure to create employment
opportunities in future. Likewise, it may also minimize taxes to supply
more money to consumers to stimulate employment indirectly from
purchases.
3. Control debt: Operating a budget deficit is not a harm. It creates more
and more debt over time. If the tax receipts and economic growth do not
increase its line, a nation witnesses an unsustainable debt. Thus, a rational
fiscal policy tends to control to avoid drastic action.
4. Redistribution: The transfer of wealth from rich to poor is another
government’s objective. High taxes may result in high tax receipts, but not
always. Although avoidance and evasion may occur, small incremental
increases may not be impactful in the short term.
5. Control Inflation: When an economy develops strongly, it may witness
inflation depending on the monetary policy. Although inflation is a
monetary phenomenon, the government still takes necessary steps to
stem such a situation. Nevertheless, governments take steps by
increasing taxes to minimize disposable incomes and consumption.

INSTRUMENTS OF FISCAL POLICY-

There are two main fiscal policy instruments, i.e., taxation and spending.
1. Taxation– Governments optimize taxation as a way of capitalizing
expenditures. The higher taxes are not popular with voters. Still, they want
higher spending on defence, education and healthcare. It aims at
encouraging investment, reducing inequality, regulating consumption,
preventing domestic industries etc.
Thus, there is a complex act that maximum governing bodies don’t follow.
Consequently, spending more than they receive.

2. Spending– Government spending plays a vital role in shaping the overall

economy. Thus, trillions of amounts are spent on wealth transfers such as
social security, Medicaid, and Medicare. Even in other developed nations,
social transfers and healthcare are high expenditures.

BUDGET
A budget is a blueprint of plan of action to be followed during a specified period
of time for the purpose of attaining a given objective.
budget is “a plan quantified in monetary terms prepared and approved prior to a
defined period of time, usually showing planned income to be generated and/or
expenditure to be incurred during that period and the capital to be employed to
attain a given objective”.
The general objective of the Union Budget is to bring about a rapid and balanced
economic growth of our country coupled with social justice and equality.
Following are the key objectives that highlight the importance of Union Budget in
India.

IMPORTANCE OF BUDGETING
1. Ensure efficient allocation of resources: It is necessary to employ the
available resources in the best interest of the country. Allocating
resources optimally helps to achieve profit maximization for the
government to foster public welfare.
2. Reduce unemployment and poverty level: Another objective of the
Union Budget is to wipe out poverty and create more job opportunities.
This will ensure that every citizen of the country is able to meet his/her
basic needs of food, shelter, and clothing, along with facilities for health
care and education.
3. Reduce wealth and income disparities: The budget aids in influencing
the distribution of income through subsidies and taxes. It helps to ensure
that a high rate of tax is levied on the rich class, thereby reducing their
disposable income. On the other hand, a lower rate of tax is charged on
the lower income group to ensure they have sufficient income in hand.
4. Keep a check on prices: The Union Budget aids in controlling the
economic fluctuations as well. It ensures proper handling of inflation and
deflation, thus bringing about economic stability. During inflation, surplus
budget policies are implemented, while deficit budget policies are devised
during deflation. This aids in maintaining a price stability in the economy.
5. Change tax structure: The Union Budget also dictates the possible
changes in the direct and indirect taxes of the country. It brings about
changes to income tax rates and tax brackets. For instance, the upcoming
income tax slab F.Y. 2020-21 is part of this budget.
The Union Budget is indeed crucial as it has a widespread impact on numerous
areas. Hence, it is imperative to have knowledge about what it stands for and its
importance.

INDUSTRIAL POLICY
Industrialisation is the first and foremost requirement of rapid economic
development of a country. The industrialisation is not only helpful in the
development of industries but it also promotes agriculture, trade, transport,
foreign trade, services and social sectors of the economy. It increases
employment opportunities, national income, per capita income and living
standard of the populace. Therefore, an industrial policy is required to establish
healthy traditions of industrialisation and to guide, regulate and control (if
required) industrial development. The industrial policy of a country is influenced
by the ideology ‘and principles of the concerned government. The industrial
policy helps the country making it self-sufficient and prosperous by preparing a
structure and basis of industrial development. Hence, the industrial policy of the
govt. must be well defined, clear, and progressive. Moreover, it should be
adhered to and implemented earnestly.

MEANING:
The industrial policy refers to such formal declaration by the government
through which general policies for industries adopted by the govt. are made
public. Any industrial policy may have mainly two parts first, the ideology of the
govt. which determines the nature of industrialisation, and second, the governing
rules and principles which provide a certain framework behind existing ideology.
Thus, industrial policy is a comprehensive concept which provides guidance and
out-lines of the policy for establishment and working of industries.

NEED, OBJECTIVES, AND IMPORTANCE OF INDUSTRIAL POLICY

The need, objectives and importance of an industrial policy can be explained
through following points :
1. Deployment of Natural Resources: The industrial policy helps in full
deployment of natural resources of the country. It helps in identifying,
collecting and using resources properly. It facilitates increase in national
income of the country.
2. To Augment Industrial Production: The main objective of the industrial
policy is to augment industrial production of the country. It provides an
impetus to rapid development of industries and industrial growth.
3. Modernisation: The industrial policy encourages modernisation for
increasing industrial output and productivity. It envisages the use of
modem and latest production techniques m industrial sector. It facilitates
maximum output at minimum cost of production.
4. Balanced Industrial Development: The industrial policy envisages
balanced industrial development of the country. It also facilitates balanced
development of various sectors of the economy.
5. Balanced Regional Development: The industrial policy helps in
balanced regional development of the country. The industrial policy may
contain provisions regarding providing facilities or concessions for rapid
development of industrially backward areas/regions of the country.
6. Coordination between Basic and Consumer Industries: The
balanced development of basic and consumer industries is essential for
economic growth. The industrial policy encourages development of basic
and key industries on the one hand, while attention is paid to the
development of consumer industries also on the other. Thus, by balanced
and coordinated development of both type of industries it provides a pace
to economic growth.
7. Coordination between Small Scale and Large Scale Industries: The
industrial policy plays a vital role in coordinated development of small
scale or cottage industries and large scale industries. These industries can
be made mutually helpful to each other through the provisions of
industrial policy.
 8. Area Determination: The industrial policy determines the area of
operation under public and private sector. Proper direction can be shown
to private sector through the country’s industrial policy.
9. Cordial Industrial Relations: A comprehensive industrial policy is
needed to establish cordial relations between workers and management.
Cordial industrial relations are essential for rapid and sustainable
industrialisation.
10.Proper Utilisation of Foreign Assistance/investment: An appropriate
industrial policy envisages to attract foreign capital and entrepreneurs. It
helps rapid industrial development of the country; A well thought of
industrial policy checks the demerits of “foreign assistance. The foreign
aid can be used in the national interest if an appropriate industrial policy is
pursued by the country.

EXIM
The EXIM Policy, also known as the Foreign Trade Policy (FTP), is regulated by
the Foreign Trade Development and Regulation Act, 1992. The DGFT (Directorate
General of Foreign Trade) is the governing body concerning the EXIM Policy of
India. The Foreign Trade Development and Regulation Act, 1992, provides for the
Indian government to announce the EXIM Policy every five years. Each EXIM
Policy announced by the Indian Government is valid for five years, and they can
amend, enhance or add new provisions to the policy every year on 31 March,
taking effect from 1 April.
The Ministry of Finance, in collaboration with the DGFT, its network of regional
offices and the Union Minister of Commerce and Industry, announces
amendments or changes to the EXIM Policy of India.
In 2004, the EXIM Policy was renamed the Foreign Trade Policy to provide a
comprehensive approach to foreign trade in India. The Ministry of Commerce
announced the recent FTP, which came into effect on 1 April 2023. FTP 2023-
2028 seeks to make India an export hub and to integrate India further into global
value chains. It creates an enabling ecosystem for exporters, which aligns with
India’s vision of becoming ‘Atmanirbhar’.
Objectives of EXIM Policy
 To increase growth in exports and imports in India.
 To stimulate long-term economic growth by expanding access to
components, intermediates, essential raw materials, consumables and
capital goods.
 To improve agriculture service and industry competitiveness, create new
employment opportunities and encourage attaining internationally
accepted quality standards.
 To supply high-quality goods and services at an affordable cost.
 To encourage economic expansion by providing access to necessary raw
materials, capital goods, installations, consumables, intermediate products
and essential elements for expanding production and providing services.
 To improve the technological productivity and potency of Indian
agriculture, services and companies, thus enhancing competitive power
 while creating employment possibilities, and to accomplish globally
acknowledged quality norms.
 To supply consumers with fine-condition services and goods at globally
competitive rates.
Importance of EXIM Policy
 It emphasises trade facilitation through digitisation and technology,
promotes e-commerce, and facilitates exports through various measures
and schemes.
 It plays a significant role in accelerating the economic flow of trade
activities from a country to India by making the Indian economy globally
oriented.
 It plays a critical role in expanding global market opportunities.
 It helps to increase the gross domestic product of India.
 It facilitates the flow of the economy from a country to India and increases
foreign exchange in India.
 It aids in facilitating liberalisation and free trade and improves the overall
market for domestic consumers.
 It plays a role in supplying quality goods at cost-effective prices to
domestic consumers and diversifying the market.

Features of EXIM Policy (Extra)

The features of EXIM Policy 2023, effective from 1 April 2023 to 31 March 2028,
are as follows:
1. Process Re-Engineering and Automation: The FTP emphasises export
development and promotion based on technology interface and principles
of collaboration, moving away from an incentive regime to a facilitating
regime. The ongoing schemes like EPCG, Advance Authorisation, etc.,
under the FTP 2015-20 will be continued considering their effectiveness
along with technology enablement and substantial process re-engineering
for facilitating the exporters.
2. Towns of Export Excellence: Four new towns, i.e. Mirzapur, Faridabad,
Varanasi, and Moradabad, are designated as Towns of Export Excellence
(TEE) along with the existing 39 towns. The TEEs have priority access to
export promotion funds under the MAI (Market Access Initiative) scheme.
They can avail of the Common Service Provider (CSP) benefits under the
EPCG scheme for export fulfilment, which boosts the exports of
handicrafts, handlooms, and carpets.
3. Recognition of Exporters: Exporter firms that are recognised based on
export performance can be partners in capacity-building initiatives on a
best-endeavor basis. Two-star and above status holders are encouraged to
give trade-related training to interested individuals based on a model
curriculum.
4. Promoting Export from the Districts: The FTP aims to build partnerships
with State Governments and take forward the DEH (Districts as Export
 Hubs) initiative for promoting district-level exports and accelerating the
development of the grassroots trade ecosystem.
5. Streamlining SCOMET Policy: There is a broader outreach and
understanding of the SCOMET (Special Chemicals, Organisms, Materials,
Equipment and Technologies) among stakeholders. The FTP is being made
more robust to implement international agreements and treaties entered
into by India. A robust export control system would provide access to dual-
use high-end technologies and goods to Indian exporters while facilitating
exports of controlled technologies or items under SCOMET from India.
6. Facilitating e-Commerce Exports: FTP outlines the roadmap for
establishing e-commerce hubs and related matters, such as bookkeeping,
returns policy, payment reconciliation and export entitlements.
7. Rationalisation of the Export Promotion of Capital Goods (EPCG) Scheme:
The EPCG scheme, which allows capital goods imports at zero customs
duty for export productions, are being further rationalised. PM MITRA
(Prime Minister Mega Integrated Textile Region and Apparel Parks) scheme
is added as an additional scheme to claim benefits under the CSP
(Common Service Provider) scheme of EPCG.
8. Dairy Sector Exempted from Maintaining Average Export Obligation: Dairy
sectors are exempted from maintaining the average export obligation to
support them in upgrading technology. Vertical farming equipment,
Battery Electric Vehicles (BEV) of all types, rainwater harvesting systems
and rainwater filters, wastewater treatment and recycling, and green
hydrogen are added to green technology products and are eligible for
reduced export obligation requirements under the EPCG scheme.
9. Facilitation Under the Advance Authorisation Scheme: The advance
authorisation scheme provides duty-free raw material imports for
manufacturing export items and is similar to the EOU and SEZ schemes.
The FTP contains certain facilitation provisions under the Advance
Authorisation scheme based on interactions with industry and Export
Promotion Councils.
10.Merchanting Trade: Under the FTP, merchanting trade of prohibited and
restricted items is possible. Merchanting trade involves the shipment of
goods from a foreign country to another foreign country without touching
Indian ports by involving an Indian intermediary. However, it will be
subject to compliance with the RBI guidelines and will not be applicable for
items or goods classified in the SCOMET and CITES list. This will allow
Indian entrepreneurs to convert places like GIFT City into major
merchanting hubs, like certain places in Singapore, Dubai and Hong Kong.
11.Amnesty Scheme: The government introduced a special one-time Amnesty
scheme under the FTP 2023 to address export obligation defaults. This
scheme provides relief to exporters who are not able to meet their
obligations under the EPCG and Advance Authorisation scheme and are
burdened by interest costs and high duty associated with pending cases.
The interest payable is capped at 100% of the exempted duties.