Exchange rate

Export Import (EXIM) policy

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 EXCHANGE RATE

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 Exchange rate
• The price of a nation’s currency in terms of
another currency.
• An exchange rate thus has two components,
the domestic currency and a foreign
currency.
• For example our domestic currency is the
Indian Rupee (INR) and the Foreign Currency
can be United States Dollars (USD) or Euros
(EUR) just to name a few

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 Types of Exchange rate
We will be exploring three types of Exchange
Rates which are:

1. Fixed Exchange Rate

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 Fixed Exchange rate
• This is where a Government maintains a
given exchange rate over a period of time.
• This could be for a few months or even
years.
• In order to maintain the exchange rate at the
stated level government uses fiscal and
monetary policies to control aggregate
demand.

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 Fixed Exchange rate
• The purpose of this system is to keep
a currency's value within a narrow band.
• Fixed exchange rates provide greater
certainty for exporters and importers, and
helps the government maintain low
inflation.

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 Advantages of fixed exchange rate

• The risk and uncertainty of trade and

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 Disadvantages of fixed exchange
rate
• Protecting the exchange rate requires domestic
economic policies to be frequently adjusted.
Monetary policy focuses on keeping the rate
stable.
• Reserves are needed to protect the value.
• An improvement in an economy’s
competiveness that results in lower prices will
not be fully passed on to export customers if the
exchange rate remains unchanged.
• Exchange rate may be undervalued or
overvalued

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 Floating/flexible exchange rate
• A floating exchange rate regime is where the
rate of exchange is determined purely by the
demand and supply of that currency on the
foreign exchange market.
• The value of a currency is allowed to be
determined by the forces of demand and supply
on the foreign exchange market.
• There is no government intervention.
• Any change in supply or demand for a currency
will cause a depreciation or appreciation in the
exchange rate.

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 Currency appreciation
• An increase in demand for the local currency
causes it to appreciate or rise.
• An appreciation means an increase in the value
of a currency, that is its worth is more in terms
of foreign currency.
• A rise or appreciation in the economy in the
country’s currency will mean that the price of
imports into the country will fall and the price of
the country’s exports will rise.
• This is represented by a shift in the supply curve

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 Currency depreciation
• If there is a greater demand for the foreign
currency the value of the local currency falls or
depreciates to the foreign currency.
• A depreciation means a decrease in the value of
a currency.
• It means a currency is worth less in terms of a
foreign currency.
• A fall or depreciation in the value of the
exchange rate will mean the opposite, that is
the price of imports into the country will rise
and the price of the country’s export will fall.

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 Managed exchange rate
• This is where the currency is broadly managed by
the forces of demand and supply but the
government takes action to influence the rate of
change in the exchange rate.
• The Central Bank seeks to stabilize the exchange
rate within a predetermined range for a given
period of time, but DOES NOT FIX IT at any
particular level. This allows for policy makers the
benefit of planning with some degree of certainty,
for the macroeconomic affairs of a country.
• Central bank intervenes to smoothen out ups and
downs in the exchange rate of home currency to its
own advantage.

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 INTERNATIONAL TRADE PRACTICES
IN INDIA

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 Export Import (EXIM) policy
• Trade policy governs exports from and imports
into a country.
• Guided by the Export-Import (EXIM) Policy of
the government of India
• Regulated by the Foreign Trade (Development
and Regulation) Act, 1992
• Contains various policy with respect to imports
and exports i.e. export promotional measures,
policies and procedures related thereof
• Prepared and announced by the Central
Government (Ministry of Commerce and
Industry) for every 5 years of span

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 History
• Directorate General of Foreign Trade (DGFT) is the
main governing body related to Exim Policy.
• Foreign Trade Act replaced the earlier law known as
the “Imports and Exports (Control) Act 1947”.
• In the year 1962, the Government of India
appointed a Special Exim Policy Committee to
review the government previous export import
policies.
• The committee was later approved by the
Government of India.
• Mr. V. P. Singh, the then Commerce Minister,
announced the Exim Policy on the 12th April, 1985.

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 Objectives of EXIM policy
• The main objective to boost the export business
in India.
• Sustained growth in exports to attain a share of
global trade
• Providing access to essential raw materials,
intermediates, components, consumables and
capital goods required for augmenting
production and providing services
• To enhance the technological strength and
efficiency of all sectors of the economy

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 Objectives of EXIM policy
• To generate new employment.
• To provide consumers with good quality
goods and services at internationally
competitive prices
• Making a market space for domestic
produce
• To accelerate the economy from low level of
economic activities to high level of economic
activities.

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 Key strategies of EXIM policy
• Unshackling of controls
• Simplifying Procedures
• Neutralizing Incidence
• Facilitating development of India
• Identifying special focus areas
• Facilitating technological upgradation
• Avoiding inverted duty structure
• Upgrading the Infrastructure
• Revitalizing the Board of Trade
• Activating Indian Embassies

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 EXIM policies of INDIA
• Exim Policy 1992-1997
• Exim Policy 1997-2002
• Exim Policy 2002-2007
• Exim Policy 2004-2009
• Exim Policy(Interim) 2009-2010
• Exim Policy 2010-2015
• New Exim Policy 2015-2020

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 EXIM policies of INDIA

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 EXPORT IMPORT INCENTIVES
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 Export incentives
• India’s economy is one of the fastest growing
economies in the world.
• As a part of economic reforms, the government has
formulated many economic policies which have led
to the country’s gradual economic development.
• Under the changes, there has been an initiative to
improve the condition of exports to other countries.
• With this regard, the government has taken up a
few actions to benefit businesses in the export
trade.
• The primary objective of these benefits is to simplify
the whole export process and make it more flexible.

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 Some of the export incentives
schemes
1. Advance Authorization Scheme
2. Advance Authorization for Annual Requirement
3. Export Duty Drawback for Customs, Central Excise,
and Service Tax
4. Service Tax Rebate
5. Duty-Free Import Authorization
6. Zero duty EPCG (Export Promotion Capital Goods)
Scheme
7. Post Export EPCG Duty Credit Scrip Scheme
8. Towns of Export Excellence (TEE)
9. Market Access Initiative (MAI) Scheme
10. Marketing Development Assistance (MDA) Scheme

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 Import incentives schemes
• The government motivates the industrial
growth and development of the country as
well as brings the foreign currency in this
process.
• Important import incentives offered by the
Government of India, that considerably
decrease the effective tax rates for the
import companies are as follows:

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 Import incentives schemes
1. Preferential Rates
2. Duty Entitlement Pass Book (DEPB) Scheme
3. Duty Drawback
4. Duty Free Import Authorization (DFIA) Scheme
5. Deemed Exports
6. Agri Export Zones
7. Served from India
8. Manufacture under Bond
9. Export Promotion Capital Goods Scheme (EPCG)
10. Project Imports

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 THANK YOU
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