In view of the gradual build up of a very high level of foreign exchange reserves of USD 79 b and the comfortable external sector scenario, and with the aim of introducing greater flexibility and transparency current and capital account controls have been further liberalized, rationalized and simplified during the last six months or so. Some of these significant developments are summarized in the following paragraphs.
EXIM Policy: The focus of the new EXIM policy has shifted in favour of export-promotion from the earlier emphasis on import control. All the earlier import control measures viz. high rate of customs duty, import-finance surcharge and quantitative restrictions etc. have been removed. The rate of export growth for the year has been targeted at 12% p.a. so as to move towards achieving a target of 1% of global trade by 31/03/2007. The EXIM policy has become transparent with the introduction of Indian Trade Classification (Harmonised System) Code & implementation of Electronic Data Interchange package at the major ports/airports of the country.
The present policy even permits the use of license dated subsequent to the date of shipment for clearance of goods and the requirement of actual user condition for import of second-hand goods less than ten years old has also been waived. Further, the scheme of Export-Promotion Capital Goods has been rationalized. Under the new EPCG Scheme, even second- hand machinery upto 10 years old can be imported. The amount of export obligation will now be eight times the amount of duty saved whereas the rate of customs duty will be a flat 5%. For calculation of the amount of export obligation, even deemed exports and export of any product manufactured by the exporter can be taken into account.
Promotion of export of diamond, gem & jewellery
Exporters of diamond, gem & jewellery have now been permitted to import rough diamonds without any licence & without payment of any duty. They have also been permitted to maintain Diamond Dollar Account subject to certain conditions.
Status holders: The status holders viz Export-house, Trading house, Star-trading house, Super star trading houses and also Export-oriented units, Export-Processing Zone units, Software Technology Park unit, Electronic hardware technology park units etc. have been allowed certain special incentives. Some of these incentives are as under:-
– 100% EEFC Entitlement
– Receipt of Import-Documents Direct from foreign exporter
– Despatch of documents direct to foreign importer.
– Repatriation period for export – 360 days
Special Economic Zone : The concept of Special Economic Zone which is based on the Chinese model has been introduced to give a special thrust to exports from the country. The units in SEZ have been granted certain unique facilities that include: –
– Duty free Import of Raw Materials/Capital Goods
– No rigid norms for value-Addition/Input-output/Export obligations
– Export Payment Terms : No Time Limit
– Bilateral netting off as on date of balance-sheet permitted
– 100% EEFC Entitlement
– Facility to off-shore Banking Units (Free from priority sector/CRR/SLR requirements)
– Hedging in commodities in international market
– Supply from domestic tariff area to Special Economic Zone to be treated equivalent to exports.
Imports : Now the Authorised Dealers are permitted to open standby letters of credit on behalf of their importer clients for import of goods into India.
Advance Remittance : Advance remittance for all permissible current account transactions including for import of goods into India can be freely allowed upto US D 1,00,000, and in case the amount is above USD1,00,000 it can still be done against a guarantee from a bank of international repute.
Private business : The Authorised Dealer can release upto US D 10000/- per calendar year and over and above this ceiling, the use of International Credit Card abroad by residents is freely permitted while on a visit outside India to the extent of the limit of the card.
Facilities for NRIs/PIOs
(a) With the abolition of NRNR/NRSR Schemes, all deposit accounts including NRO for NRIs/PIOs have been made almost fully convertible. The Authorised Dealers may allow remittance upto USD 1 million per calendar year (upto June 2003) out of balance held in NRO account including those representing sale proceeds of assets, rent, dividend, pension and interest on production of an undertaking & certificate/Income Tax clearance/No objection certificate from the I.Tax authorities. Balances in NRO account can also be used for making payment towards bills received under International Credit Card issued to NRIs. Further, repatriation of sale proceeds of immovable property in India acquired by NRIs/ PIOs has been permitted to the extent of amount paid in foreign exchange/out of NRE/ FCNR(B) accounts. Even the proceeds of assets acquired by way of inheritance/legacy upto USD 1,00,000, per calendar year on behalf of NRIs/ PIOs/ foreign nationals has been permitted freely. FCNR(B) deposit holders can now book cross-currency forward contract to convert the balance in one foreign currency to another foreign currency in which the FCNR(B) deposits are permitted to be maintained, to provide better hedging opportunities to them. FCNR(B) deposit holders can avail of foreign currency loan in India against the security of these deposits.
Foreign Currency Accounts Abroad: Companies/ Firms/ Corporates registered in / incorporated in India are permitted to maintain foreign currency accounts abroad for normal business purposes but they are not permitted to create any financial liabilities for their H.O. in India or for investment of surplus funds abroad.
Indian Direct Investment in Joint Venture/Wholly owned Subsidiaries abroad – The ceiling for the purpose has been enhanced to USD 100 million and the Authorised Dealer may sell foreign exchange upto 100% of the networth of such companies.
Overseas investment in companies – The corporates (upto 25% of their networth) , individuals (without any ceiling) and Mutual funds (upto USD
1 billion) can invest in companies which are listed on a recognized stock exchange and are having a share holding of at least 10% in any Indian company listed on a recognized stock exchange.
