Foreign Investment

India’s Trade Policies: A Guide for Foreign Businesses

India’s Foreign Trade Policy (FTP) 2023 was announced on 1^st April 2023. As stated by the Minister of Commerce Sh. Piyush Goyal, FTP 2023, is a dynamic, open-ended policy accommodating emerging needs. It aims to increase exports and seeks to take India’s exports to 2 trillion dollars by 2030. The four pillars on which the FTP 2023 stands are Incentive to Remission, Export promotion through collaboration, Ease of Doing Business, and Emerging Areas.

What is Foreign Trade Policy (2023)?

India’s Foreign Trade Policy is a policy document based on the continuity of time-tested schemes facilitating exports. It is also a document that is quick and responsive to trade requirements. India’s trade Policies are based on the principles of ‘trust’ and ‘partnership’ with exporters.

Aim of India’s Foreign Trade Policy 2023

1. Re-engineer and automate to facilitate ease of doing business for exporters.
2. Focus on emerging areas such as dual-use high-end technology items SCOMET, facilitate e-commerce export, and collaborate with States and Districts for export promotion.
3. Introduce a one-time Amnesty Scheme for exporters to close the old pending authorizations and start fresh.
4. Recognize new towns through the “Towns of Export Excellence Scheme” and exporters through the “Status Holder Scheme.”
5. Facilitate exports by streamlining the popular Advance Authorization and EPCG Schemes¹ and enabling merchanting trade from India.

Critical Aspects of India’s Foreign Trade Policy 2023

Let’s discuss India’s Trade policies for 2023 in detail.

• Process Re-Engineering and Automation: Automated IT systems with risk management systems have been introduced. The automated system will help obtain various approvals under the new trade policy. It aims to develop and promote export by facilitating exports based on the technology interface and principles of collaboration. Some of the ongoing schemes, such as Advance Authorization, EPCG, etc., which have been effective, will be continued along with substantial process re-engineering and technology enablement for facilitating the exporters. India’s Trade Policy 2023 codifies the implementation mechanism in a paperless, online environment. This will promote ease of doing business.
  
  Further, reducing fee structure and IT-based schemes will make it easier for MSMEs and others to access export benefits. The Duty exemption schemes for export production will be implemented through Regional Offices in a rule-based IT system environment. In FY23-24, processes under the Advance and EPCG Schemes, such as issue, re-validation, and EO extension, will be dealt with in a phased manner.

• Towns of Export Excellence: In addition to the existing 39 towns, four new towns have been designated Towns of Export Excellence (TEE). These four towns are Faridabad, Mirzapur, Moradabad, and Varanasi. The TEES will have priority access to export promotion funds and can avail of the Common Service Provider (CSP) benefits for export fulfillment under the EPCG Scheme. The addition of these four towns is expected to boost the export of handlooms, handicrafts, and carpets.

• Recognition of Exporters: Based on the performance, the exporters are recognized with ‘status. These recognized exporter firms will not be partners in capacity building on a best-endeavor basis. The status holders will be encouraged to provide trade-related training based on the model curriculum to interested individuals. This will help build a skilled workforce capable of servicing a $5 trillion economy before 2030. Status recognition norms have been fine-tuned to enable more exporting firms to achieve 4 & 5-star ratings. This would lead to better branding opportunities in export markets.

• Promoting export from the districts: India’s foreign trade policy aims to build partnerships with State Governments and take forward the Districts as Export Hubs (DEH) initiative to promote exports at the district level and accelerate the development of the grassroots trade ecosystem. An institutional mechanism will be established to identify export-worthy products and services and resolve the concerns at the district level will be made. The institutional mechanism will be the State Export Promotion Committee at the state level and the District Export Promotion Committee at the District level. District-specific export action plans will be prepared for each district, outlining the district-specific strategy to promote the export of identified products and services.

• Streamlining SCOMET Policy: As India’s integration with export control regime countries strengthens, India is emphasizing “export control.” Emphasis is placed on more comprehensive outreach and understanding of SCOMET (Special Chemicals, Organisms, Materials, Equipment, and Technologies) among stakeholders. The policy regime is being made more robust to implement the international treaties and agreements entered into by India. A robust export control system will provide access to dual-use High-end goods and technologies to Indian exporters while facilitating exports of controlled items/technologies under SCOMET from India.

• Facilitating E-commerce Exports: E-commerce exports are different from traditional offline trade. It requires distinct policy interventions from traditional offline trade. E-commerce export is expected to range from $200 to $300 billion by 2030. India’s Foreign Trade Policy 2023 lays the roadmap for establishing e-commerce hubs and related elements such as payment reconciliation, bookkeeping, returns policy, and export entitlements. The consignment-wise cap on E-commerce exports through Courier has been raised from Rs. 5 Lakh to Rs. 10 Lakh in India’s Foreign Trade Policy 2023. Due to the integration of Courier and postal exports with ICEGATE, exporters can claim benefits under India’s Foreign Trade Policy. To facilitate e-commerce exports, extensive outreach and training will be provided to build the capacity of artisans, weavers, garment manufacturers, and gem and jewelry designers to onboard them on E-commerce platforms.

• 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. The Scheme has been rationalized, and some changes have been added. These changes are:
  • Prime Minister Mega Integrated Textile Region and Apparel Parks (PM MITRA) Scheme
  • This Scheme has been added as an additional scheme to claim benefits under the Common Service Provider (CSP) Scheme of the EFPCG.
  • Battery Electric Vehicles (BEV) of all types, Vertical Farming equipment, Wastewater Treatment and Recycling, Rainwater harvesting system, rainwater Filters, and Green Hydrogen are added to Green Technology products.

This will not be eligible for the reduced Export Obligation requirement under the EPCG Scheme.

• Facilitation under Advance Authorization Scheme: Advance Authorization Scheme has been placed on a similar footing as EOU and SEZ Schemes. When assessed by DTA units, Advance Authorization Scheme provides duty-free import of raw materials for manufacturing export items. Specific facilitation provisions have been added to India’s Foreign Trade Policy based on interactions conducted with the industry and Export Promotion Councils. These provisions include:
  • Special Advance Authorization Scheme extended to export the Apparel and Clothing sector under para 4.07 of the HBP on a self-declaration basis to facilitate prompt execution of export orders.
  • The benefits of Self-Ratification were for fixation of Input-Output Norms extended to 2-star and above status holders in addition to Authorized Economic Operators at present.
• Merchanting Trade: New merchanting provisions have been introduced by India’s Foreign Trade Policy to develop India into a merchanting hub. Merchanting trade restricted and prohibited under the export policy would not be possible. Merchanting trade means the shipment of goods from one foreign country to another foreign country without coming to the Indian ports. However, merchanting trade would be subject to compliance with the RBI guidelines. Further, these guidelines will not apply to goods or items classified in the CITES and SCOMET list. In the coming times, this will help Indian entrepreneurs convert places like GIFT City, etc., into a merchanting hubs similar to places like Dubai, Singapore, and Hong Kong.
• Amnesty Scheme: Amnesty Scheme is the one-time Scheme under India’s Foreign Trade Policy 2023 to address default in Export Obligations. This Scheme aims to reduce litigation and foster trust-based relationships. This initiative will help alleviate the issues faced by exporters. This Scheme will provide relief to exporters who have been unable to meet their obligations under the EPCG and Advance authorizations. This Scheme will also relieve exporters burdened with high duty and interest costs associated with pending cases. All pending cases exempted in proportion to unfulfilled Export Obligations will be regularized on payment of all customs duties. The interest payable is capped at 100% of these exempted duties under this Scheme. However, no interest is payable in a portion of Additional Customs Duty and Special Additional Customs Duty. It will likely provide relief to exporters as the interest burden will substantially decrease. The purpose of this amnesty scheme is to allow the exporters to have a fresh start and to come into compliance. 

Conclusion

India’s Foreign Trade Policy 2023 is a dynamic policy. It aims to boost India’s exports and promote growth in the coming years. It focuses on technology interface and ease of doing business. This policy is expected to facilitate the growth of the export industry. It will also create a favorable environment for MSMEs and other businesses to access export benefits. India’s Foreign Trade Policy of 2023 is expected to take India’s exports to new heights making India emerge as a global leader in the export industry.

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1. https://www.dgft.gov.in/CP/?opt=epcg