India’s Union Minister of Commerce and Industry, Consumer Affairs, Food and Public Distribution and Textiles recently launched the Foreign Trade Policy (FTP) 2023, a policy document which is based on the continuity of time-tested schemes facilitating exports and designed to be nimble and responsive to the requirements of trade. The new trade policy will come into effect from April 1, 2023.
Details and Key Components of FTP 2023
Built on the principles of trust and partnership with exporters, FTP 2023 aims at process re-engineering and automation to facilitate ease of doing business. The policy consists of four pillars: Incentive to Remission; Export promotion through collaboration; Ease of doing business, reducing transaction cost and e-initiatives; Emerging Areas and E-Commerce Expansion. Another key element includes the development of Districts as Export Hubs, and streamlining Special Chemicals, Organisms, Materials, Equipment, and Technologies (SCOMET) policy.
The government set a goal to elevate India’s overall exports to USD 2 trillion by 2030, with equal contributions from both merchandise and services sectors. The use of Indian currency in cross-border trade will also be encouraged under a new payment settlement framework introduced by the RBI in July 2022.
Salient Features of FTP 2023
FTP 2023 emphasizes on export promotion and development, shifting away from an incentive regime to a facilitating regime based on technology interface and principles of collaboration. This will be achieved by reducing fees, introducing IT-based schemes, eliminating manual interfaces and implementing duty exemption schemes for export production through Regional Offices in a rule-based IT system environment.
Four new towns including Faridabad, Mirzapur, Moradabad, and Varanasi will now hold the status of Towns of Export Excellence (TEE), and could avail Common Service Provider (CSP) benefits for export fulfillment under the Export Promotion Capital Goods (EPCG) Scheme. FTP 2023 also introduced initiatives such as ‘each one teach one’ to promote capacity building and provide trade-related training.
Export Promotion and SCOMET Policy
FTP 2023 aims to build partnerships with state governments and promote exports at the district level while accelerating the development of grassroots trade ecosystem. Each district will have specific export action plans outlining strategies to promote export of identified products and services.
In terms of the SCOMET policy, India is placing more emphasis on the “export control” regime as its international integration strengthens. A robust export control system in India would provide access to dual-use high-end goods and technologies to Indian exporters.
E-Commerce Expansion under FTP 2023
FTP 2023 outlines plans to establish e-commerce hubs and related elements. To kickstart this initiative, the cap on E-Commerce exports through courier has been raised from ₹5Lakh to ₹10 Lakh. Feedback from exporters will determine whether this cap will be further revised or eventually removed.
Scheme Facilitations under FTP 2023
The EPCG Scheme, which already allows for import of capital goods at zero Customs duty for export production, will be further rationalized. The Advance Authorization Scheme, accessed by DTA units, provides duty-free import of raw materials for manufacturing export items. Also noteworthy is an Amnesty Scheme set to launch, which will allow exporters a six-month window to utilize the scheme and regularize any outstanding export obligation defaults.
Comparison with Previous Trade Policies
When comparing the FTP 2023 with the previous foreign trade policy of 2015-2020, the latter had aimed for exports of USD 900 billion by 2020; this target was extended till March 2023. However, India is likely to conclude 2022-23 with total exports of USD 760-770 billion as opposed to USD 676 billion in 2021-22.