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International Trade — OCM STD 11 Commerce — Question

Gujarat BoardEnglish MediumSTD 11 CommerceOCMInternational Trade5 Marks
Question
Explain the meaning of export incentives and state its tools in brief.
✓

Answer

  • Introduction :
    • Each country encourages its exporters. Each country wants to increase its exports. Foreign exchange can be earned only through foreign trade.
    • Through its products can be imported from other countries.
    • Guidance is provided to exporters, along with financial aids by government.
  • Meaning of Export Incentive (Promotion) :
    • Availability of domestic products to international exporters, at the best quality, cheapest rate, as and when they require.
    • Government encourages export to earn foreign exchange.
    • It is called export Promotion (incentive) to business.
    • Every government uses different types of measures to boost up export of the product of the country.
  • Why Export Incentives ? :
    • Government provides export incentives.
    • The following causes are responsible to encourage export.
      • To obtain Foreign exchange, increase in export is necessary. We need foreign exchange to pay imported bills. Country should have sufficient foreign exchange.
      • Export is necessary for sound, stable and safe economy.
      • The country having more foreign exchange is called a prosperous and wealthy country. Export should be increased to get foreign exchange.
  • Tools for Export Incentives (Promotion):
    • It is the duty of the government to encourage exporters.
    • Government can take following measure to increase export.
    • It can provide following incentives /promotion.
      • Trade Agreement :
      • Every country makes trade agreement with other countries keeping political view point in consideration.
      • According to this, trade agreement contract is signed to import the products of one country or many countries.
      • As a result, the exporters of the concerned nation get encouragement to export their products or service.
      • Financial and Economic Incentive Return :
      • $(i)$ Government allows direct discount to the exporters according to its policy.
      • $(ii)$ Sometimes sales tax and excise are exempted on the goods exported or charged at very low rate.
      • $(iii)$ Sometimes income earned from exported goods is partially or completely declared tax free.
      • $(iv)$ To promote exporters, required raw material, electricity and other things are provided at comparatively low rates.
      • For export oriented products, government announced exports oriented policy is in budget.
      • Integrated and Organized Economic Incentive Schemes : Under this scheme
      • $(i)$ if the desired target of export is achieved, then within fixed limit of amount of economic benefit is gained through import, is allowed. The products for import is decided by government.
      • $(ii)$ Those exporters who assure export, are given land at concessional rate and are given subsidy to establish factories in tax free area. Exporters who avail these facilities have to export total target or to export total production.
      • Following financial facilities and services :
      • Following financial facility and services are provided to exporters
      • The exporter gets payment of export bill, the same day he exports the product.
      • Protection is given when there is change in foreign exchange rate.
      • To make arrangement to get goods imported easily.
      • To provide service as guarantor after studying financial stability of the exporter.
      • Incentive through Non-Economic Facilities :
      • Required information and guidance are provided.
      • Government imparts required training and information for preparing export oriented
      • products.
      • Competition is held among exporters and the winner is awarded honored in public.
      • If the workers of factory of export oriented products announce strike or lockout then government announces illegal.
      • Special Economic Zone $(SEZ)$ :
      • Government of India has passed the law in $2005$ of Special Economic Zone.
      • It is in effect from $10th$ February $2006.$
      • Under this law, various types of incentives are allowed if the industry is established in specific geographical area announced by government.
      • Its primary purpose is to attract local and foreign capital investment.
      • Areas included in Special Economic Zone :
      • $(A)$ Export Processing Zone.
      • $(B)$ Free Trade Zone
      • $(C)$ Free Ports
      • $(D)$ Industrial Estate
      • Incentives allowed in Special Economic Zone for export growth :
      • $(1)$ Exemption from custom duty.
      • $(2)$ Exemption from central excise duty.
      • $(3)$ Exemption from service tax.
      • $(4)$ Exemption from central sales tax.
      • $(5)$ Exemption from security transaction tax.
      • Government has made attempts to develops infrastructure facilities to attract local and foreign capital investment
      • Export Processing Zone $(EPZ)$ :
        • The government of India has established Export Processing Zone in different areas to gain foreign exchange in huge amount.
        • Export Process Zone and free trade zone are the synonyms of each other.
        • Under the policy announced by the government of India in Kandla, Noida, Santa Cruz (Mumbai), Falta, Cochin, Chennai, Visakhapatnam, Dahej (Bharuch) Free Trade Zones have been established.
      • Incentive allowed in Free Trade Zone for export promotion :
        • In this zone excise duty and rules regarding financial transactions within the country and beyond the country are relaxed.
        • There was relaxation in the laws related to labour.
        • Primary facilities like electricity, water supply, road, communication etc., are provided to run industry.
        • High quality raw material and Continuous supply of raw material is assured.
        • Latest information regarding export is provided to exporter.
        • In foreign countries, market position of various products, political situation regarding export policy, traffic facility of vehicles etc., and information is provided.
  • Conclusion :
    • Government can make required changes in incentives allowed to exporters.
    • When foreign currency is needed for development then government adopts favorable policies for export promotion.
    • Government of India gives 'Udyog Ratna' award to the highest exporter.

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