FOREIGN TRADE POLICY 2023
1. Context
Recently, the Union Minister of Commerce and Industry, Consumer Affairs, Food and Public Distribution and Textiles launched the Foreign Trade Policy (FTP) 2023 which comes into effect from April 1, 2023.
2. Key Points
- The Previous Foreign Trade Policy for 2015-2020 had targeted exports of USD 900 billion by 2020
- This target was extended along with the policy for three years till March 2023.
- India is, however, likely to end 2022-23 with total exports of USD 760-770 billion as against USD 676 billion in 2021-22.
3. About FTP 2023
The policy is based on the Principles of trust and partnership with exporters and aims at process re-engineering and automation to facilitate ease of doing business for exporters.
The Key Approach to the policy is based on these 4 pillars:
- Incentive to Remission
- Export promotion through collaboration-Exporters, States, Districts and Indian Missions
- Ease of doing business, reduction in transaction cost and e-initiatives and
- Emerging Areas-E-Commerce Developing Districts as Export Hubs and Streamlining SCOMET Policy.
4. Goals and Targets
- The Government aims to increase India's overall exports to USD 2 trillion by 2030, with equal contributions from the merchandise and services sectors.
- It also intends to encourage the use of 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.
5. Salient features
- Targets $ 2 trillion in exports by 2030
- Continuous and responsive framework with no end date
- Making the rupee a global currency
- Making India a trade hub
- Digitisation and faster processing of applications
- Amnesty scheme for the shortfall in export obligations
- Restructuring of the Department of Commerce
- Over 50 per cent reduction threshold for recognition of star trade houses
6. Process Re-Engineering and Automation
- The policy emphasizes export promotion and development, moving away from an incentive regime to a regime which is facilitating, based on technology interface and principles of collaboration.
- FTP 2023 codifies implementation mechanisms in a paperless, online environment, building on earlier ease-of-doing-business initiatives.
- Reduction in fee structures and IT-based schemes will make accessing export benefits easier for MSMEs and others.
- Duty exemption schemes for export production will now be implemented through Regional Offices in a rule-based IT system environment, eliminating the need for a manual interface.
7. Towns of Export Excellence
- Four new towns, namely Faridabad, Mirzapur, Moradabad and Varanasi have been designated as Towns of Export Excellence (TEE) in addition to the existing 39 towns.
- The TEEs will have priority access to export promotion funds under the MAI scheme and will be able to avail of Common Service Provider (CSP) benefits for export fulfilment under the EPCG Scheme. It is expected to boost the exports of handlooms, handicrafts and Carpets.
8. Recognition of Exporters
- Exporter firms recognized with "status" based on export performance will now be partners in capacity-building initiatives on a best-endeavour basis.
- Similar to the "each one teaches one" initiative, 2-star and above status holders would be encouraged to provide trade-related training based on a model curriculum to interested individuals.
- Status recognition norms have been re-calibrated to enable more exporting firms to achieve 4 and 5-star ratings, leading to better branding opportunities in export markets.
9. Promoting export from the districts
- The FTP aims at building partnerships with State governments and taking forward the Districts as Export Hubs (DEH) initiative to promote exports at the district level and accelerate the development of the grassroots trade ecosystem.
- Efforts to identify export-worthy products & services and resolve concerns at the district level will be made through an institutional mechanism State Export Promotion Committee and District Export Promotion Committee at the State and District level, respectively.
- District-specific export action plans to be prepared for each district outlining the district-specific strategy to promote the export of identified products and services.
10. Streamlining SCOMET Policy
- India is placing more emphasis on the "export control" regime as its integration with export control regime countries strengthens.
- There is a wider outreach and understanding of SCOMET (Special Chemicals, Organisms, Materials, Equipment and Technologies) among stakeholders and the policy regime is being made more robust to implement international treaties and agreements entered into by India.
- A robust export control system in India would provide access to dual-use High-end goods and technologies to Indian exporters while facilitating exports of controlled items/technologies under SCOMET for India.
11. Facilitating E-Commerce Exports
- Various estimates suggest e-commerce export potential in the range of $200 to $300 billion by 2030.
- FTP 2023 outlines the intent and roadmap for establishing e-commerce hubs and related elements such as payment reconciliation, bookkeeping, returns policy and export entitlements.
- As a starting point, the consignment-wise cap on E-Commerce exports through courier has been raised from ₹ 5 Lakh to ₹ 10 Lakh in the FTP 2023.
- Depending on the feedback of exporters, this cap will be further revised or eventually removed.
12. Facilitation under the Export Promotion of Capital Goods (EPCG) Scheme
The EPCG Scheme allows the import of capital goods at zero Customs duty for export production, which is being further rationalised. Some key changes being added are:
- Prime Minster Mega Integrated Textile Region and Apparel Parks (PM MITRA) scheme has been added as an additional scheme eligible to claim benefits under the CSP (Common Service Provider) Scheme of Export Promotion Capital Goods Scheme (EPCG),
- Dairy Sector to be exempted from maintaining Average Export Obligations to support the dairy sector to upgrade the technology.
- 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 and will now be eligible for reduced Export Obligation requirements under EPCG Scheme.
13. Facilitation under the Advance Authorization Scheme
- The advance authorisation Scheme accessed by DTA units provides duty-free import of raw materials for manufacturing export items and is placed at a similar footing to EOU and SEZ schemes.
- Special Advance Authorisation Scheme extended to the export of the Apparel and clothing sector under a self-declaration basis to facilitate prompt execution of export orders.
- Benefits of Self-Ratification Scheme for fixation of Input-Output Norms extended to 2 stars and above status holders in addition to Authorised Economic Operators at present.
14. Merchanting trade
- Merchanting trade of restricted and prohibited items under the export policy would now be possible.
- Merchanting trade involves the shipment of goods from one foreign country to another foreign country without touching Indian ports, involving an Indian intermediary.
- This will be subject to compliance with RBI guidelines and won't be applicable for goods/ items classified in the CITES and SCOMET lists.
- This will allow Indian entrepreneurs to convert certain places like GIFT City etc. into major merchanting hubs as seen in places like Dubai, Singapore and Hong Kong.
15. Amnesty Scheme
- Under the amnesty Scheme, an online portal will be launched for registration and a six-month window will be available to exporters to avail of the scheme.
- It will cover all pending cases of default in the export obligation of authorisations, these can be regularised on payment of all customs duties exempted in proportion to unfulfilled export obligations.
For Prelims & Mains
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For Prelims: Foreign Trade Policy 2023, Amnesty Scheme, Merchanting trade, PM MITRA, SCOMET Policy, RBI, EPCG Scheme,
For Mains:
1. What are the measures taken by the Indian government to achieve a $ 5 trillion economy? (250 Words)
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Previous Year Questions
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1. With reference to the international trade of India at present, which of the following statements is/are correct? (UPSC 2020)
1. India's merchandise exports are less than its merchandise imports.
2. India's imports of iron and steel, chemicals, fertilizers, and machinery have decreased in recent years.
3. India's exports of services are more than its imports of services.
4. India suffers from an overall trade/current deficit.
Select the correct answer using the code given below:
A. 1 and 2 only B. 2 and 4 only C. 3 only D. 1, 3 and 4 only
Answer: D
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Source: PIB
