CHAPTER - 5

EXIM TRADE
EXPORT TRADE

• Exports are explained as the goods and services manufactured in one country and
acquired by citizens of another country. The export of good or service can be
anything. This trade can be done through shipping, e-mail, transmitted in private
luggage on a plane. Basically, if the product is manufactured domestically and
traded in a foreign country, it is known as an export.
• In international trade, exports are one of the components. The other component is
imported which means the goods and services purchased by a country’s citizens
that are manufactured in a foreign country. Both the export and import combined
contribute to the country’s trade balance. Whenever the country’s export is more
than the import, it is called a trade surplus. However, when the import is more than
the export, it is known as a trade deficit.
OBJECTIVES OF EXPORT TRADE

• Sale of Surplus Production

• Optimum Utilization of Domestic Resources
• Employment Opportunities
• Earning of Foreign Exchange
• Increase the National Income
EXPORTS AFFECT ON ECONOMY

• Most countries want to increase their exports. Their companies want to sell more. If they’ve sold all they
can to their own country’s population, then they want to sell overseas as well. The more they export, the
greater their competitive advantage. They gain expertise in producing the goods and services. They also
gain knowledge about how to sell to foreign markets.
• Governments encourage exports. Exports increase jobs, bring in higher wages, and raise the standard of
living for residents.
• As such, people become happier and more likely to support their national leaders.
• Exports also increase the foreign exchange reserves held in the nation’s central bank. Foreigners pay for
exports either in their own currency or the U.S. Dollar. A country with large reserves can use it to manage
their own currency’s value. They have enough foreign currency to flood the market with their own
currency. That lowers the cost of their exports in other countries.
• Countries also use currency reserves to manage liquidity. That means they can better control inflation,
which is too much money chasing too few goods. To control inflation, they use the foreign currency to
purchase their own currency. That decreases the money supply, making the local currency worth more.
IMPORT TRADE

• The import trade is referred to goods and services purchased into one nation from
another. The word “import” originates from the word “port” considering the fact that
the products are frequently transported via ship to foreign countries. Similar to exports,
imports are also the backbone of international trade. Here, if the expense of a country’s
imports is more than the value of its exports than the country has a negative balance of
trade (BOT), which is also known as a trade deficit.
• Every country import goods and services that the domestic country cannot
manufacture, maybe because the country cannot produce effectively or cheaply like
another exporting country. Few countries sometimes also import commodities and raw
materials which are not available on their premises. For instance, many nations import
oil they cannot manufacture it locally or cannot provide sufficient to meet the demand.
OBJECTIVES OF IMPORT TRADE
1. To speed up industrialization
• Developing countries import scarce raw materials, capital goods and advanced technology required for
rapid industrial development.
2. To meet domestic demand
• The goods which are in demand but are not available in the country are imported.
3. To overcome natural disasters
During drought, flood, earthquake and other natural calamities country import food grains and other
essential commodities to prevent starvation.
4. To improve standard of living
• Imports enable consumers in the home country to enjoy a wide variety of products of high quality.
• It helps in improving the standard of living of masses.
5. To ensure national defence
• The importer must get the receipt of credit from his concerned bank and send it to the foreign supplier.
IMPORTANT STEPS INVOLVED IN A TYPICAL IMPORT TRANSACTION

• Trade enquiry and sending quotations

• Procurement of import license
• Obtaining foreign exchange
• Placing order or indent
• Obtaining letter of credit
• Arrangement of finance
• Receipt of shipment advice
• Arrival of goods
• Customs clearance and release of goods
Export Marketing

• Export marketing is the practice by which a company sells products or services to a foreign
country. Products are produced or distributed from the company’s home country to buyers in
international locations. But there is a difference between products that are available to foreign
countries and products that are specifically marketed to foreign customers.

• Globalization and e-commerce have all contributed to a recent influx in international trade.
What used to only be attainable by large-scale businesses is now accessible to small companies
and those in the business of resale. Products and services are often performed internationally at
greatly reduced costs, making international expansion and production outsourcing a suitable
option for businesses.
FACTORS CONSIDERED WHILE DEVELOPING EXPORT
MARKETING
• Foreign Country Selection
• Natural Conditions Research (Optional)
• Socioeconomic Research
• Competitor Landscape
MAJOR PROBLEM FACED BY EXPORT SECTOR IN INDIA:

1. Poor Quality Image

2. High Costs
3. Unreliability
4. Infrastructural Bottlenecks
5. Inadequacy of Trade Information System
6. Supply Problems
7. Faceless Presence
8. Uncertainties
9. Procedural Complexities
10. Institutional Rigidities
EXIM POLICY
1. To enhance the level of exports.
2. To improve the balance of payment.
3. To improve the balance of trade.
4. To enhance the reverse of foreign exchange.
5. To allow import of technology and equipment’s which may help in establishing new industrial enterprises,
produce new products and adopt a new process for higher production levels.
6. To ensure the availability of goods for the domestic consumption and to allow exports so that the producers
get a fair price;
7. To allow import of certain goods as listed in the open general licence;
8. To allow for hassle free exports and imports;
9. Reducing the interface between the exporters and director general of foreign trade by reducing the number
export documents;
10. Establishing advance licencing system for imports of goods needed for manufacturing various goods for
export;
PROCESSING AN EXPORT ORDER
• Confirmation of order
• Procurement of goods
• Quality control
• Finance
• Labeling, packaging, packing and marking
• Insurance
• Delivery
• Customs procedures
• Customs house agents
• Documentation
• Submission of documents to bank - bill of exchange - letter of credit (if shipment is under L/C) - invoice -
packing list - airway bill/bill of lading - declaration under foreign exchange - certificate of origin - inspection
certificate, wherever necessary
• Realization of export proceeds
BALANCE OF PAYMENT

• The balance of payments (BOP) is the method countries use to monitor all international monetary
transactions at a specific period. Usually, the BOP is calculated every quarter and every calendar year. All
trades conducted by both the private and public sectors are accounted for in the BOP to determine how
much money is going in and out of a country. If a country has received money, this is known as a credit, and
if a country has paid or given money, the transaction is counted as a debit. Theoretically, the BOP should be
zero, meaning that assets (credits) and liabilities (debits) should balance, but in practice, this is rarely the
case. Thus, the BOP can tell the observer if a country has a deficit or a surplus and from which part of the
economy the discrepancies are stemming.
• The balance of payments is the record of all international financial transactions made by a country's
residents. A country's balance of payments tells you whether it saves enough to pay for its imports. It also
reveals whether the country produces enough economic output to pay for its growth. The BOP is reported
for a quarter or a year.
METHODS OF CORRECTING DISEQUILIBRIUM IN THE
BALANCE OF PAYMENTS

• 1. Deflation: deflation is the classical medicine for correcting the deficit in the balance of payments.
Deflation refers to the policy of reducing the quantity of money in order to reduce the prices and the
money income of the people. The central bank, by raising the bank rate, by selling the securities in the
open market and by other methods can reduce the volume of credit in the economy which will lead to a
fall in prices and money income of the people.
• 2. Depreciation: another method of correcting disequilibrium in the balance of payments is
depreciation. Deprecation means a fall in the rate of exchange of one currency (home currency) in terms
of another (foreign currency). A currency will depreciate when its supply in the foreign exchange market
is large in relation to its demand. In other words, a currency is said to depreciate if its value falls in terms
of foreign currencies, i.E., If more domestic currency is required to buy a unit of foreign currency.
• 3. Devaluation: devaluation refers to the official reduction of the external values of a currency. The
difference between devaluation and depreciation is that while devaluation means the lowering of
external value of a currency by the government, depreciation means an automatic fall in the external
value of the currency by the market forces; the former is arbitrary and the latter is the result of
market mechanism.
• 4. Exchange control: exchange control is the most widely used method for correcting
disequilibrium in the balance of payments. Exchange control refers to the control over the use of
foreign exchange by the central bank. Under this method, all the exporters are directed by the central
bank to surrender their foreign exchange earnings. Foreign exchange is rationed among the licensed
importers. Only essential imports are permitted
GOVERNMENT POLICY MAKING AND CONSULTATIONS

• 1. Department of commerce ministry of commerce is the apex ministry at the central level to
formulate and execute india's foreign trade policy and to initiate various exports promotional measures.
E main functions of the ministry are formulation of international commercial policy, egotiation of trade
agreements, formulation of export-import policy and their implementation. Has created a network of
commercial sections in indian embassies and high commissions various countries for exportimport
trade flows.
• 2. Board of trade it has been set up on may 5, 1989 with a view to provide an effective mechanism to
maintain continuous dialogue with trade and industry in respect of major developments in the field of
international trade. It provides regular consultation, monitoring and review of india's foreign trade
policies and operations. The board has the representatives from commerce and other important
ministries, trade and industry associations and export services organisations.
• 3.Empowered committee of secretaries for speedier and quicker decision making, an empowered
committee of secretaries has been set up to assist the cabinet committee on exports.
• 4. Grievances cell grievances cell has been established to entertain and monitor disposal of grievances
and suggestions received. the purpose is to redress the genuine grievances, at the earliest. the grievance
committee is headed by the director general of foreign. trade. at the state level, the head of the
concerned regional licensing authority heads the grievances committee.
• 5. Director general of foreign trade (dgft) dgft is an important office of the ministry of commerce to
help formulation of india's export4mport formulation policy and implementation thereof. it has set up
regional offices in almost all the states and union territories. these offices are known as regional
licensing authorities. the regional licensing offices also act as export facilitation centres.
• 6.Ministry of textiles this is another ministry of government of india which is responsible for policy
formulation, development, regulation and export promotion of textile sector including sericulture, jute
and handicrafts etc. it has a separate export promotion division, advisory boards, development
corporations, export promotion councils and commodity boards. the advisory hoards have been set up
to advise the government in the formulation of the overall development programmes in the concerned
sector. it also devises strategy for expanding markets in india and abroad.
• 7. Institutional framework export promotion councils and commodity boards have been established
with the objective of promoting and strengthening commodity specialization. they are the key
institutions in the institutional framework, established in india for export promotion