Showing posts from January, 2016

A case for trade invoicing in INR

Should it matter whether the international trade invoices are quoted in INR or USD? A simple thinking says it shouldn't. When buying/selling a good or service we mentally convert the currencies in the head or a calculator and it doesn't matter much. Like an inch or millimetre, they seem to be just units with a floating (or fixed or pegged or whatever) conversion ratio. It appears that it is not so. It does matter, and with profound consequences. Today, over 97% of India's exports are invoiced in freely convertible currencies (FCCs) mainly in USD. INR is not yet an FCC due to restrictions on movement and convertibility in capital account. The realisation of export proceeds in India need to be in FCCs as mandated by  FEMA and the master circular on exports and imports . While para 2.52 of India's foreign trade policy allows export invoicing in INR, in addition to FCCs, the trade prefers quoting invoices and contracts in USD, Euro and other FCCs. It appears that it is

Time for an RMS at DGFT?

DGFT is the body that deals with international trade policy making in India. Apart from making broad contour of policy, and issuing import export code; a mandatory document to start imports/exports in India, it also implements various tax nullification schemes (AA/DFIA), capital goods upgradation scheme (EPCG) and few schemes to offset infrastructural inefficiencies(MEIS/SEIS). It also runs a complaint resolution mechanism (chapter 8) in the area of international trade. DGFT implements various schemes through its field offices across the country.  DGFT field offices are severely understaffed in the recent times. The retiring staff have not been replaced, under the plea that computerisation leads to better productivity. While the argument of computerisation leading to higher productivity is true in general; it is not automatically applicable if the underlying workflow is not changed. DGFT processes the file manually even today, with each file moving along with the notes like a no