Overview of India’s New Foreign Trade Policy and Its Impact

Kiran Malik

05 Apr, 2023

The new Foreign Trade Policy, which will take effect on April 1, 2023, was unveiled on March 31, 2023, with the goal of fulfilling the 2 trillion-dollar export objective by 2030, with 1 trillion dollars coming through merchandise trade. Notwithstanding the COVID epidemic and the world’s unpredictable condition, India’s exports have increased from $435 billion to $760 billion. Nonetheless, Indian exports remain insignificant in contrast to global exports. The new strategy prioritizes lowering transaction time and cost, encouraging exports, and assisting exporters.

The Five Ds of The Policy

The objective of the policy is summarized in the five Ds: Duration, Dynamic, Direction, Decentralization, and Disaster Proof.

• Duration of the policy will continue until it is withdrawn. This means that the policy is not time-bound and will continue until the government withdraws it.
• Dynamic refers to the policy’s ability to make changes constantly to address the issues of trade and industry and to achieve the goal of increasing exports.
• Direction refers to the focus on growth and competitiveness and integration. The policy aims to make India an important player in the global market and increase its share of exports.
• Decentralization refers to the policy’s focus on inclusive growth. The policy aims to promote exports from all parts of the country, not just from the major cities. This will help to create more job opportunities and promote economic growth in rural areas.
• Disaster Proof refers to the policy’s focus on the rupee trade account. This will help to protect Indian exporters from the impact of currency fluctuations and other external factors that could affect their exports.

Reduction of Transaction Time And Cost

The main objective of the new Foreign Trade Policy is to reduce the transaction time and cost for exporters. To achieve this, the policy proposes to implement an online automatic approval system. Under this method, new advance authorizations, EPCG authorizations, revalidations, and extensions of the advance authorizations’ export obligation periods will all be granted the same day. This will be adopted initially as a pilot program, and if it is successful, it will be expanded over the entire nation.

The application fees for various authorizations have been substantially reduced. This will make it easier and more affordable for exporters to apply for these authorizations.

The policy also introduces the E-Certificate of Origin and Self-certified Certificate of Origin. This will make it easier for exporters to obtain the required certificates, which will help to reduce the transaction time and cost.

Automatic Export Obligation Discharge And Paperless Authorization System

The policy proposes to introduce an automatic export obligation discharge and paperless authorization system. This will make it easier for exporters to fulfill their export obligations and obtain the required authorizations. The system will be fully automated, which will help to reduce the transaction time and cost.

Export Facilitation

• The Indian government is taking various steps to facilitate exports and improve the ease of doing business for manufacturers and exporters. The threshold limit for granting status holder certificate has been substantially reduced, which will help in branding Indian products and services.
• The turnover of merchandise trade will also be considered for granting status holder certificate. Fruits and vegetables exports will be given double weightage over and above MSME weightage, providing an added boost to the agriculture sector.
• To further boost cluster-based economic development, the Town of Export Excellence (TEE^[1]) scheme has been extended to various cities, including Faridabad, Moradabad, Mirzapur, and Varanasi. The benefits of the TEE scheme include recognition for promoting and branding exports, marketing assistance initiation schemes, and financial assistance to visit trade exhibitions and fares for exploring more marketing avenues. Common service providers in TEE will be entitled to EPCG authorization, while exporters may not necessarily own all the infrastructure and still consider such exports as their own.

Export Promotion

• Export promotion is a crucial aspect of the new Foreign Trade Policy (FTP). To facilitate exports and promote them at the grassroots level, the District Industries Centre (DIC) will act as an Export Hub. The DIC will help in bringing greater awareness and commitment regarding exports and will help in identifying products and services that can be exported.
• States and districts will be active participants in promoting exports and identifying new markets. Districts, through the DIC, will focus on the development of logistics, testing facilities, connectivity for exports, and other export-oriented ecosystems.
• Promoting e-commerce exports is a key area of focus for the new FTP. To encourage e-commerce exports, all benefits under FTP will be extended to e-commerce operators. Exports can be made through Dak Ghar Niryat Kendra, which will be operationalized throughout the country with the help of Foreign Post Office (FPO).
• Processing facilities such as labeling, testing, and repackaging at designated hubs will be allowed. These hubs will have warehousing facilities where e-commerce aggregators can easily stock their goods, go through customs clearance, and process returns. This will enable e-commerce exporters to operate more efficiently and with greater ease.
• The promotion of exports through the DIC and the extension of benefits to e-commerce operators are important steps towards promoting exports and enhancing India’s position in the global market.

Ease of Doing Business For Manufacturers Exporters

• The new Foreign Trade Policy also aims to provide ease of doing business for Manufacturers Exporters. The government has exempted the dairy sector from maintaining Average Export Obligation, which will help in supporting the sector to upgrade their technology. Additionally, several new products such as Battery Electric Vehicles (BEV), Vertical Farming equipment, Wastewater Treatment and Recycling, Rainwater harvesting system and Rainwater Filters, and Green Hydrogen have been added to the list of Green Technology products. These products will now be eligible for reduced Export Obligation requirement under the EPCG Scheme.
• The Prime Minister Mega Integrated Textile Region and Apparel Parks (PM MITRA) scheme has been added as an additional scheme eligible to claim benefits under the Common Service Provider (CSP) Scheme of Export Promotion Capital Goods Scheme (EPCG). This will provide additional benefits to the textile and apparel sector and support them in enhancing their exports.
• To facilitate exports, the government has also introduced a Self-Ratification scheme for SION (Standard Input Output Norms) for 2 star & above and Authorized Economic Operators (AEOs). This will allow exporters to self-certify the value of inputs and outputs used in the production of goods for export. Additionally, a self-declaration basis for the special advance authorization scheme to export apparel and clothing sections has also been introduced.
• To streamline the licensing process for export of certain sensitive items, the government has introduced general authorization for export of certain SCOMET (Special Chemicals, Organisms, Materials, Equipment, and Technologies) items. This will make the licensing process more efficient and help in promoting exports in these sectors.

Relief to the Exporters- Amnesty Scheme Introduced

• A one-time amnesty scheme has been introduced, with interest only up to the amount of custom duty paid. In addition, no interest will be charged on payments of additional custom duty or Special Additional Custom Duty.
• The amnesty policy is only in effect for a limited period, through September 30, 2023, and does not apply to cases that are under investigation.

Conclusion

The new Foreign Trade Policy (FTP) announced by the Indian government aims to promote exports and facilitate ease of doing business for manufacturers and exporters. The various measures introduced in the policy such as exemption for dairy sector, inclusion of new products under Green Technology, and extension of benefits to the textile and apparel sector will support these industries and help enhance their exports. The introduction of the amnesty scheme and self-certification process for exporters will also streamline the process and reduce the burden on businesses. With these initiatives, the government is taking steps towards realizing its goal of making India a hub for exports and boosting its economic growth.

Also Read:
All about New Foreign Trade Policy 2021-26
New Foreign Trade Policy will come into effect from April 01, 2021