IMPORT POLICY

The economic needs of the country, effective use of foreign exchange and industrial as well as consumer requirements are the basic factors which influence India's import policy. On the import side the policy has three objectives:
to make necessary imported goods more easily available, including essential capital goods for modernizing and upgrading technology; to simplify and streamline procedures for import licensing; to promote efficient import substitution and self-reliance. There are only 4 prohibited goods: tallow fat, animal rennet, wild animals and unprocessed ivory. There is a restricted list, but most of the restrictions are on grounds of security, health and environmental protection or because the goods are reserved for production by small and tiny enterprises, which are home-based or village-based and which require low skills and employ a large number of people. But the policy of restricting import of consumer goods is changing.

The Indian government's clearly laid down policy is to achieve, through a series of progressive steps, the average tariff levels prevalent in the ASEAN region. The basic customs tariff rate now ranges from 0 to 40% plus additional duty of 2%; the average rate is about 30%.

Imports are allowed free of duty for export production under a duty exemption scheme. Input-output norms have been specified for more than 4200 items. These norms specify the amount of duty-free import of inputs allowed for specified products to be exported.

There are no quantitative restrictions on imports of capital goods and intermediates. Import of second-hand capital goods is permitted provided they have a minimum residual life of 5 years. There is an Export Promotion Capital Goods (EPCG) Scheme under which exporters are allowed to import capital goods (including computer systems) at concessionary customs duty, subject to fulfillment of specified export obligations. Service industries enjoy the facility of zero import duty under the EPCG Scheme. Likewise, hospitals, air cargo, hotels and other tourism-related industries. Software units can use data communication network to export their products.

INCENTIVES

General Incentives Several nontax incentives in the form of capital subsidies and concessional credits are offered by the central and state governments in the interest of developing backward areas, exports or some specific industries. No distinction is made between domestic and foreign investors.

Regional Incentives Industrial units that are set up in specified backward districts are eligible for a central government subsidy on their fixed capital investment and for concessional financing from national financial institutions. The central government also grants a transport subsidy in certain selected areas. In addition, the state governments offer various types of incentives and facilities, such as land on concessional terms, water and power at reduced rates, concessions in sales tax and octroi ( a levy of duty on entry of goods into a specified area), and other subsidies.
Certain areas (six in 1985) have been designated as free trade or export-processing zones, and are located at Kandla, Santa Cruz, Cochin, Madras, Falta and Noida. Industries that are set up in these areas and fulfill the required conditions are eligible for various concessions, exemptions and benefits in respect of customs duty, excise duty, sales tax, foreign equity participation, licensing regulations, and concessional finance.

Special Industry Incentives Certain industries, e.g., jute textiles, are eligible for concessional credits in the form of soft loans. Some others, e.g., tea plantations, are given subsidies for labor housing, replanting, etc.

Export Credits Export incentives take the form of cash assistance or cash compensatory support on exports of certain items, duty drawback, i.e., a refund of central excise and customs duties levied on raw materials and components used in the manufacture of exports, import replenishment to replace imported raw materials and components used in the manufacture of exports, airfreight subsidy on the export of certain products, special treatment for export-oriented units for import of raw materials, and credit facilities from approved financial institutions at pre-shipment and post-shipment stages.

DEPB Rates and DutyDrawback Rates of Plastics 

INDUSTRIAL POLICY

Over the last four decades India has recorded remarkable expansion and diversification in practically all areas of industrial development. India's vast resources-human, agricultural, mineral and industrial- have been fully exploited for this purpose. The New Industrial Policy has helped in catalyzing foreign investment into India. The total amount of foreign direct investment approval which was Rs 5,341 million in 1991, swelled to Rs 141,871.9 million in 1994. Of the total FDI approvals, 80% are in the priority sectors such as power, oil refineries, electronics and electrical equipment, chemicals, telecommunications, food processing etc.

Policy Resolution of 1956 and the Statement on Industrial Policy of 1991 provide the basic framework for the overall industrial policy of the Government in regard to the manufacturing industries. In the initial stages of the country's development, growth of industry was regulated through the granting of industrial licenses and other industrial approvals. The Industries (Development and Regulation) Act, 1951 was the principal legislation providing the legal basis for industrial licensing. The industrial policy announced on 24th July, 1991 substantially dispensed with industrial licensing, announced measures facilitating foreign investment and technology transfers, and threw open the areas hitherto reserved for the public sector.

The private sector can now operate in all areas except those of strategic concern such as defence, railway transport and atomic energy. The list of industries reserved for the public sector now stands reduced to 6. Private participation is permitted in some specific areas in this list as well, such as mining; oil exploration, refining and marketing; and parts of the railway transport sectors.

The requirement of obtaining an industrial license for manufacturing activity is limited to:
Industries reserved for the pubic sector. 16 industries of strategic, social or environmental concern. Industries reserved for the small scale sector. All other industries are exempt from licensing, and only subject to the locational restrictions of metropolitan areas.