India unveiled a ‘dynamic and responsive’ foreign trade policy on Friday, with the goal of increasing outward shipments to $2 trillion by 2030, making the Indian Rupee a global currency, and incentivizing e-commerce exports.
Foreign Trade Policy 2023 takes the approach of shifting from an incentive to a remission-based regime, encouraging collaboration among exporters, states, districts, and Indian Missions, lowering transaction costs, and developing more export hubs.
In the fiscal year 2022-23, which ends on Friday, India’s merchandise and services exports are expected to exceed $765 billion. In the previous fiscal year, total exports were $676 billion.
Unlike the practice of five-year FTPs, the government has issued a dynamic and responsive trade policy that has no end date and will be updated in response to the evolving global scenario.
“We have ensured that there is no end date to this policy; it will be updated on a regular basis,” said Santosh Sarangi, Director General of Foreign Trade, while briefing the media on the key features of the FTP 2023 unveiled by Commerce and Industry Minister Piyush Goyal.
Goyal stated that the Department of Commerce will make a massive focused outreach to the world over the next 4-5 months, either sectorally or country-wise. The department will collaborate with the Ministry of External Affairs and Indian Missions abroad.
“We must continue to meet our export targets.” We will reach USD 2 trillion in exports by 2030, but merchandise exports should not outperform services exports,” the minister said.
The DGFT said India is likely to cross $765 billion merchandise and services exports in financial year 2022-23 which ends on Friday. Total exports in 2021-22 were $676 billion.
The FTP aims to Internationalize Indian rupee trade. It allows international trade settlement in INR, and the RBI has made the necessary changes to grant export benefits and fulfill the Export Obligation for export realisations in the domestic currency.
“If there are countries where there is currency failure or a dollar shortage, we are willing to trade in the rupee with them,” said Sunil Barthwal, Commerce Secretary.
He also emphasized that Indian exporters must become globally competitive and no longer rely on subsidies.
In the interests of trade and industry, as well as to encourage exporters, the FTP provides relief to exporters who are unable to fulfill their EO under the Export Promotion Capital Goods scheme and Advance Authorisations.
It establishes an amnesty program for Advance Authorisation and EPCG authorisation holders to settle one-time defaults in export obligations.
As per the scheme, all pending cases of the default in meeting EO can be regularised on payment of customs duties that were exempted and Interest will be charged at the rate of 100% of the duty exemption.
The FTP aims to streamline policy for export of dual use items under Special Chemicals, Organisms, Materials, Equipment and Technologies.
SCOMET policy emphasises India’s export control in line with its international commitments under various export control regimes (Wassenaar arrangement, Australia group and Missile Technology Control Regime) to control trade in sensitive/dual use items/technology.
It also focuses on simplifying policies in order to facilitate the export of dual-use high-end goods/technology such as UAVs/drones, cryogenic tanks, and certain chemicals.
The FTP 2023 focuses on engaging with states and districts through the Districts as Export Hubs initiative, which includes, among other things, identifying products and services in each district, establishing institutional mechanisms, and developing district export action plans.
The policy extends FTP benefits to e-commerce exports, which are expected to reach $200-300 billion by 2030.
Guidelines are being developed in collaboration with other ministries to streamline e-commerce export facilitation.
There will also be targeted outreach and training for small e-commerce exporters.
Green technology products now include battery electric vehicles of all types, vertical farming equipment, waste water treatment and recycling, rainwater harvesting systems and rainwater filters, and green hydrogen, making them eligible for reduced Export Obligation requirements under the EPCG scheme.
Another key feature of the policy is the extension of a special Advance Authorisation scheme for the apparel and clothing sector to facilitate the prompt execution of export orders.
The dairy industry has also been exempted from maintaining an average EO. The move will assist the sector in upgrading its technology.
Faridabad, Moradabad, Mirzapur, and Varanasi have been designated as Towns of Export Excellence in order to promote cluster-based economic development. There are currently 39 TEES.
The policy, which comes against the backdrop of global uncertainties, outlines measures for merchanting trade under which a trader based in India can buy from one country and supply to another.
Furthermore, the export performance threshold for recognizing exporters via Status Holders has been lowered. The new standards have significantly reduced the threshold for obtaining Star House status.
Among the other key initiatives announced in the policy are the digitization of FTP applications and automatic system-based approvals.
The FTP has implemented a pilot program to process Advance Authorisation extension/revalidation applications in a single day, which currently takes three to one month.
The DGFT stated that policy changes have been implemented since 2015, despite the lack of an announcement of a new FTP.
Even if the schemes are foreclosed, the schemes sanctioned under the policy will be honoured for the duration of their sanction. Due to the pandemic and volatile geopolitical scenario, the Foreign Trade Policy 2015-20, which was set to expire on March 31, 2020, was extended several times. The most recent extension was until March 31, 2023.
