Economy
All you need to know about India’s new foreign trade policy
Summary
The government has finally unveiled its new Foreign Trade Policy (FTP) which came into force on 1 April. The previous policy, launched in 2015, had to be extended several times due to the pandemic and geo-political developments. Mint explains its importance:
The government has finally unveiled its new Foreign Trade Policy (FTP) which came into force on 1 April. The previous policy, launched in 2015, had to be extended several times due to the pandemic and geo-political developments. Mint explains its importance:
What is the significance of FTPs?
Under the Foreign Trade Development and Regulation Act, 1992, the government is required to formulate, implement and monitor trade policies to boost exports, facilitate imports and maintain a favourable balance of payments. The first five-year export-import (EXIM) policy of 1992 and the second in 1997-2002 aimed to remove many of the post-independence trade protectionist measures and promote India’s integration with the global economy. In 2004, the EXIM Policy was renamed FTP to adopt a comprehensive approach to India’s foreign trade. Later, FTPs were issued for 2009-14 and 2015-20.
Did the previous FTP meet its objectives?
FTP 2015-20 aimed to boost India’s exports from $465 billion in 2013-14 to $900 billion by 2019-20. It introduced a new merchandise exports from India scheme to provide rewards to exporters to offset infrastructural inefficiencies and associated costs and a services export from India scheme to encourage the exports of notified services. At the conclusion of the policy’s initial term in 2019-20, exports of goods and services reached $526.55 billion. Export momentum was derailed in 2020-21 by the pandemic and geopolitical tensions. Exports for 2022-23 are projected at $760 billion.
What is the duration of FTP 2023?
The government has broken away from the conventional practice of setting a five-year cycle. The new policy is intended to be responsive to changing circumstances and will be modified as and when required. Additionally, the government will consistently gather input from relevant stakeholders to enhance and revise the policy.
What are its key thrust areas?
It has four pillars. These are: replacing the incentive-based system of promoting exports with remission and entitlement-based regimes; facilitating enhanced collaboration among exporters, states, districts and Indian missions; reducing transaction costs and introducing e-initiatives for ease in business operations; and developing additional export hubs. It also intends to simplify the export process for items falling under the Special Chemicals, Organisms, Materials, Equipment, and Technologies (SCOMET).
What are the goals and targets?
The government aims to increase India’s overall exports to $2 trillion by 2030, with equal contributions from the merchandise and services sectors. The government also intends to encourage the use of the Indian currency in cross-border trade, aided by a new payment settlement framework introduced by the RBI in July 2022. This could be particularly advantageous in the case of countries with which India enjoys a trade surplus.
Jaydeep Mukherjee and Puneet Kumar Arora are faculty members at IIFT and DTU, respectively.
