India Government policies and regulations that facilitate/regulate international marketing activities

International marketing in simpler terms can be commonly expressed as global marketing which normally means that marketing not focusing on one country but to market its products or services to several countries. In general, there are various ways to perform International marketing.  Many companies produce products in home country and do sales in home country as well as in the other countries by the way of exporting those products directly to such countries to which they had the trade relationships. This is called direct export.  Sometimes companies sell their product to third parties, who in turn sell the products in other countries, this is exporting indirectly. Company of one country issues licenses to companies of other countries to use their brand name in their markets, which is called the licensing method of market entry for which the licensee company should pay the royalty payment to the licensor.  Franchising is another method of market entry in the international markets, which is similar to licensing.  Similarly, contracting out the production of the product to other foreign companies based on another country.  On few occasions, foreign trade can also be done by establishing a manufacturing company of the product in the host country, for which the company can obtain tax incentives from the host government.  Foreign trade is also possible by the way of joint venture.  In the joint venture method, two organizations from two different countries come together with similar objectives share their resource in more economic way to achieve the common goal of promoting their trade in their countries as well as in other countries.

Each country’s trade relations with other countries would be in two forms, outward transactions and inward transactions.  Outward transactions would be in the form of exports of goods and services to other countries whereas inward transactions which is vice versa.  However, country formulates its own trade policy to balance the economy in the country, and also enforce some regulations to maintain the cross border transactions.  Absence of these trade regulations of the host country, imports from foreign country may drastically impact and harm the host government’s market and economy by the invasion of foreign goods.

India, in order to regular its trade relations with other countries, has enacted The Foreign Exchange Management Act, 1999 (FEMA), which came into effect from June 2000, which replaced the previous Act, Foreign Exchange Regulation Act, 1973 (FERA).  The main objectives of FEMA is to provide free external trade and monetary transactions, regulating the joint venture, mergers, collaborations or establishments of subsidiary organizations in India by foreigners or in abroad by Indians.  One of the main objectives is also to control the foreign exchange market in India.  FEMA is extended to whole of India, and has control on branch offices or agencies established outside India, which is controlled by the resident of India,

Under FEMA Act, permission of Reserve Bank of India is required for the following acts such as

  1. Any person to deal or transfer any foreign exchange or foreign security to any unauthorized person.
  2. To make payments to the person outside India, not allowed even in the form of credit.
  3. To receive any payment for the person outside India from any unauthorized person.
  4. To enter into any financial transaction to purchase the asset outside India
  5. To acquire, hold, own, possess or transfer any foreign exchange, foreign security or any immovable property situated outside India.

Powers of Reserve Bank of India governs the transactions related to any borrowing or lending in foreign exchange or in the Indian currency between a person resident in India and a person resident outside India, deposits between resident in India and person outside India, on acquisition of immovable properties, or giving guarantee or surety for any debt, obligation or other liability of resident India by a resident outside India.

FEMA regulates export of goods and services by the following methods:

  • Act mandates the exporters to furnish the declaration contacting the details of export of goods or services.
  • By the way of furnishing the documentation by the exporters to the RBI for realization of proceeds, RBI keeps its check on the exporter’s financial transactions coming inward into the country.

The present trade policy to expand the diversification of the Indian exports, in 2009 to 2014 policy, has brought 26 new countries within the scope of Focus Market Scheme, for which it increased the incentives from 2.5% to 3%. Out trade policy also focused mainly on technological upgradation by introducing Export Promotion Capital Goods (EPCG) Scheme with zero duty for certain engineering products, electronic products, chemicals, textiles, apparels, plastics, and some leather and leather products.  Also news schemes and policies introduced to promote agricultural exports, handlooms, handicrafts.  For import of precious stones and jewelry, duty free entitlement provided to make make India a diamond international trading hub.  CVD is exempted for many leather articles. In the field of Electronics and IT Hardware Manufacturing Industries, expeditious clearances of DGFT are given.

Board of Trade is established to play an vital role in advising the Government on issues chiefly related to foreign trade, as well as other functions such as review of export performance, policies  and procedures of import and exports and other related functions.  The chairman Board of Trade is Commerce & Industry Minister.

Apart from FEMA, the foreign direction investments are governed by regulations of Reserve Bank of India. Investment by the foreign companies in India sectors are governed by the RBI rules and regulations. RBI not given access to foreign companies to invest in certain sectors such as Atomic energy, lottery business, gambling and betting, agriculture, real estate sector etc.,   and also permitted such foreign investments in a limited percentage in order to protect the interests of the country, interests of Indian companies from acquisitions by foreign companies and Indian economy.  Foreign investments in India are restricted by the way of the conditions provided under automatic route and government route.  The Indian company which receives FDI either through Automatic route or the Government route must comply with provisions of the FDI policy.

Apart from these laws, Central Excise and customs Act also regulates the foreign trade by the way of imposing excise duties and import duties to protect the home market and prices of like goods imported.  Certain anti-dumping laws and countervailing duties on the imported goods to restrict the dumping of such goods in low prices, and also to control the prices of like goods of the importing country.

Hence, the object of all these laws is to promote the exports and imports as well as to balance the trade in country as well as to generate the revenue and employment and to increase the per capita income by developing the economy of the country.

By Anitha Gutti