14 Oct

Foreign Trade Policy, 2023

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Content

• Introduction
• The Key Approach to the policy is based on these 4 pillars
• Key Aims and Objectives of India’s FTP, 2023
• Policy aims to boost India’s exports through several measures
• Key provisions related to e-commerce in FTP, 2023
• Foreign Trade Policy, 2023 and Districts as Hub of Exports

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Introduction

Foreign Trade Policy (FTP) refers to a set of guidelines, regulations and measures formulated by a government to govern its international trade.

FTP, 2023 is a policy document which is based on continuity of time tested schemes facilitating exports as well as a document which is nimble and responsive to the requirements of trade.

The Key Approach to the policy is based on these 4 pillars:

1. Incentive to Remission
2. Export Promotion through collaboration – Exporters, States, Districts, Indian Missions
3. Ease of Doing Business, reduction in transaction cost and e-initiatives.
4. Emerging Areas – E-commerce, Developing Districts as export Hubs and streamlining SCOMET Policy.
• Note: SCOMET stands for Special, Chemicals Organisms, Materials, Equipment, and
Technologies (SCOMET) policy.

Key Aims and Objectives of India’s FTP, 2023 are:

• Boost India’s exports to USD 2 trillion by 2030.
• Strengthen India’s export competitiveness.
• Diversify export basket, expand export market, and promote sustainable exports.
• Focus on promoting exports from small and medium enterprises (SMEs). For this policy envisages support in the form of access to finance and markets.
• Provide incentives for exporters, including duty drawback, export promotion capital goods (EPCG) scheme, and interest subvention schemes.
• Encourage collaboration between exporters, states, and districts to promote exports.
• Simplify and streamline the process of exporting goods and services:
• Focus on emerging areas of export, such as e-commerce, green technology, and defence and aerospace. These are the areas where India has a competitive advantage, and the policy aims to help businesses take advantage of these opportunities.

The Policy aims to boost India’s exports through several measures:

• Process Re-engineering and Automation (technology enablement) for facilitating exporters.
• Expanding the scope of Town of Export Excellence (TEE) by including Faridabad, Mirzapur, Moradabad and Varanasi in the existing list of 39 towns listed as Towns of Export Excellence (TEE).

Note: Under this scheme recognized associations of units are provided financial assistance under the Market Access Initiative Scheme on a priority basis, for export promotion projects for marketing, capacity building and technological services, and to visit various trade exhibitions/fairs for exploring more marketing avenues.

• Promoting Exports from districts by building partnerships with state government and taking forward the District as Export Hubs initiative to promote exports at the district level.
  • Institutions like State Export Promotion Committee and District Export Promotion
    Committee will identify export worthy products and services.
  • District specific export action plans will be prepared for each district.
• A robust export control system in India would provide access of dual use High end goods and technologies to Indian exporters while facilitating exports of controlled items/technologies under SCOMET (Special Chemicals, Organisms, Materials, Equipment, and Technologies) from India.
• Facilitating E-Commerce Exports through establishment of e-commerce hubs and other related elements.
  • The consignment wise cap on E-commerce exports through courier has been raised from Rs 5 Lakh to Rs 10 lakh.
  • A comprehensive e-commerce policy addressing export/import ecosystem is planned to be brough soon.
• Export Promotion of Capital Goods (EPCG) Scheme has been rationalized.
  • Prime Minister Mega Integrated Textile Region and Apparel Parks (PM MITRA) scheme has been added as an additional scheme eligible to claim benefits under CSP(Common Service Provider) Scheme of Export Promotion capital Goods Scheme(EPCG).
  • Battery Electric Vehicles (BEV) of all types, Vertical Farming equipment, Wastewater Treatment and Recycling, Rainwater harvesting system and Rainwater Filters, and Green Hydrogen are added to Green Technology products – will now be eligible for reduced Export Obligation requirement under EPCG Scheme.
• Introduction of provisions for merchanting trade.
  • Note: Merchanting trade involves shipment of goods from one foreign country to another foreign country without touching Indian ports, involving an Indian intermediary.
• Amnesty Scheme to provide relief to exporters who have been unable to meet their obligations under EPCG and Advance Authorization schemes. This will reduce litigations and foster trust based relationship.

Challenges:

• Global Economic Uncertainty: The global economy is facing a number of challenges, including the COVID-19 pandemic, the Russia-Ukraine war, and rising inflation. These challenges could impact India’s exports, as they could lead to lower demand for Indian goods and service.
• Competition from other emerging economies : Countries like China, Vietnam etc are also competing to increase its export base and may become a hurdle in India’s achievement of its export targets
• Domestic challenges such as infrastructure bottleneck, regulatory hurdles, lack of skilled workforce and high cost of logistics may also become a hindrance to India’s exports.

Way Forward:
» Increased government support to exporters in the form of access to finance and market.
» Improvement in infrastructure such as roads, railways, airways etc for easier and faster export of goods and services.
» Streamlined regulations related to customs and taxation.
» Increased investment in R&D for development of innovative products and services fulfilling the global demands.
» Promoting Brand India in global market. This will attract foreign buyers and increase demand for Indian goods and services.

Conclusion1:
» Overall, the Foreign Trade Policy 2023 is a comprehensive and ambitious document that has the potential to boost India’s exports and promote economic growth. Though, it faces some challenges, but with strong political will, and collaboration with various stakeholders, these challenges could be overcome.

Conclusion2:
» The new FTP is a shift from an incentive based approach and creates an enabling ecosystem for exporters, which is a move in line with India’s vision of becoming ‘Atmanirbhar’ (self-reliant).

Example Questions:
What are the key objectives of India’s Foreign Trade Policy, 2023? Highlight some of the
challenges to the implementation of this policy. Suggest measures to make this policy more
effective in boosting India’s exports [15 marks, 250 words]

Foreign Trade Policy, 2023 and E-commerce

Introduction:

• India’s e-commerce market is one of the largest in the world. It has been made possible due to increase penetration of smart phones, internet and digital payment systems. However, when it comes to e-commerce exports, it accounts for only a very small fraction of India’s total exports.
•  But, FTP, 2023 looks to change this and increase India’s e-commerce exports by enabling vendors to access the international markets.

Key provisions related to e-commerce in FTP, 2023

• The new section on ‘Promoting Cross Border Trade in Digital Economy’ gives a fillip to e-commerce exports in the following ways:
  • Extending all FTP benefits to e-commerce exports.
  • Increasing the value limit for exports through couriers to INR1,000,000 per consignment.
  • Promoting e-commerce through the postal routes: Government aims to operationalize ‘Dak Niryat Kendras’ to “work on a hub and spoke model with Foreign Post Offices (FPOs) to facilitate cross border e-commerce and to enable artisans, craftsmen and MEMEs in the hinterland to reach international market.
  •  The policy also proposed to create E-Commerce Export Hubs (ECEHs), which would act as a centre for favourable business infrastructure and facilities for cross border e commerce activities. These hubs would provide the necessary infrastructure for exports, and also connect to and leverage the services of the nearest logistics hubs.
  • Handholding and outreach schemes to small players on how to use e-commerce
    platforms effectively.

Conclusion:

E-commerce platforms for exports can serve as a democratized marketplace that allows small vendors, MSMEs, and local artisans to access international market and retain higher profit margins. This will not only boost India’s exports but will also lead to inclusive growth and development.

Question: “The Foreign Trade Policy, 2023 approaches digitally enabled cross-border trade in an inclusive manner and seeks to make small players part of India’s exports” Elaborate [10 marks, 150 words]

Foreign Trade Policy, 2023 and Districts as Hub of Exports

The Foreign Trade Policy, 2023 was launched with the goal of boosting exports to the USD 2 trillion by 2030. Towards achieving this goal, one of the sections of the FTP aims to galvanize districts of the country to become export hubs.
It is being done in the following ways:

• Identifying products and services with export potential in the district
• The policy proposes to do so by creating District Export Promotion Committees (DEPC) and creating District Export Action Plans for each district.
• The interventions at the district level can generate awareness and help small vendors to access bigger markets.
• Further, steps such as promotion of exports through e-commerce and promotion of exports from MSME will also contribute to development of small towns and districts as export hubs.
• Lastly, the FTP has declared four new ‘Towns of Export Excellence’ (TEE)[Faridabad-Apparel, Moradabad-Handicraft, Mirzapur – Handmade carpet and Dari, Varanasi – Handloom and handicraft] [in addition to existing 39 TEEs ] with the objective of moving up the value chain and tapping into new markets.
• These initiatives are thus in sync with the spirit of ‘Local goes Global’ and ‘Vocal for Local’. But to make these initiative successful, it is important to focus upon:
  •  Improving export infrastructure and regulations in every district and town.
  • Studying global quality standards and bringing Indian standards in sync with global standards.

Ques: Discuss the role of Foreign Trade Policy 2023 in galvanizing districts of the country to become export hubs [10 marks, 150 words]