Economy
New FTP eyes $2 tn in exports by 2030
Summary
Trade policy seeks to support merchanting trade, e-commerce
New Delhi: India aims to achieve an ambitious goal of $2 trillion in annual exports by 2030 and position itself as a global trading hub akin to Dubai and Singapore, which facilitate trade between producers and consumers by relying on their infrastructure and business-friendly environment.
The government’s new Foreign Trade Policy (FTP) 2023 aims to develop India as a significant merchanting trade hub by incorporating rules for such trade. Merchanting trade involves the shipment of goods from one foreign country to another foreign country through an Indian intermediary but without touching Indian ports.
“Third-party exports are a big exporting activity in places like Dubai, Singapore and Hong Kong. Because we didn’t have a clear policy on how merchanting trading would happen for restricted and prohibited items, RBI and bankers were reluctant to deal with this. We, for the first time ever, are putting an explicit provision in our FTP for merchanting trade," director general of foreign trade (DGFT) Santosh Kumar Sarangi told reporters on Friday after unveiling the policy. “Using these intermediaries based in India can export items from a second country to a third country without touching ports of India. This is likely to help India in making itself a big trading hub in the future," Sarangi added.
Breaking from convention, the government launched the trade policy without an end date, keeping room for revisions to better respond to heightened global economic volatility that has dragged global growth estimates lower.
The new policy comes after much delay as the last policy effective from 2015-20 saw four extensions amid major global supply chain disruptions such as covid-19 and the Russia-Ukraine war.
The policy assumes special significance as India’s merchandise exports have started declining due to slowing demand in advanced economies. The policy has also emphasized trade facilitation through technology with a focus on emerging areas such as e-commerce exports, developing districts as export hubs and boosting merchanting trade and pushing for rupee payment under FTP schemes.
To facilitate e-commerce exports, the consignment-wise cap on e-commerce exports through courier has been raised from ₹5 lakh to ₹10 lakh in FTP 2023.
“Depending on the exporters’ feedback, this cap will be further revised or eventually removed. Integration of courier and postal exports with Indian Customs Electronic Data Interchange Gateway (ICEGATE) will enable exporters to claim benefits under FTP," the commerce ministry said in a statement.
The comprehensive e-commerce policy addressing the export or import ecosystem would be elaborated soon, based on the recommendations of the working committee on e-commerce exports and inter-ministerial deliberations, the government added.
Sarangi further said battery electric vehicles (BEVs) of all types, vertical farming equipment, wastewater treatment and recycling systems, rainwater harvesting systems and rainwater filters, and green hydrogen have been added to green technology products. They will now be eligible for reduced export obligation requirement under EPCG Scheme, he said.
Application fee for MSMEs is being reduced for advance authorization and Export Promotion Capital Goods (EPCG) from ₹1 lakh to ₹5,000, he added.
To help settle tax disputes amicably, a special one-time amnesty scheme was announced under the FTP 2023 to address default on export obligations. The scheme is intended to provide relief to exporters who have been unable to meet their commitments under the Export Promotion Capital Goods scheme and Advance Authorizations and are burdened by high duty and interest costs associated with pending cases.
“All pending cases of default in meeting export obligations (EO) of authorizations mentioned can be regularized on payment of all customs duties that were exempted in proportion to unfulfilled export obligation. The interest payable is capped at 100% of these exempted duties under this scheme. However, no interest is payable on the portion of Additional Customs Duty and Special Additional Customs Duty," the ministry said. India’s foreign trade, exports and imports of merchandise and services are estimated to cross $1.6 trillion or 48% of India’s nominal GDP of $3.4 trillion for the fiscal year ending March 2023.
Despite sectoral weaknesses, high trade figures underline the emergence of trade as an important component of the Indian economy. The higher trade-to-GDP ratio also speaks of high trade openness to Indian practices, Global Trade Research Initiative (GTRI) said.
A higher growth rate in services exports compared to merchandise exports has improved the overall performance of India’s exports.
