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New Foreign Trade Policy will come into effect from April 01, 2021

The union ministry of commerce and industry, on 12^th January 2021 announced that the New Foreign Trade Policy 2021-26, which is under formulation, will take effect on 1^st April 2021. This new policy will be implemented for a period of five years and shall strive to make India better in international trade.

An Overview on the prospects of New Foreign Trade Policy of India

A meeting of Parliamentary Consultative Committee of Ministry of Commerce and Industry^[1] was held, and this meeting was chaired by Shri Hardeep Singh Puri, Minister of State for Commerce and Industry. It was attended by the members of the parliament and also by the senior officers of the ministry.

India’s Foreign Trade Policy has been conventionally formulated for a period of five years at a time. The Policy 2015-20 came into effect on 1^st of April, 2015 and it was extended due to the Covid-19 pandemic for one year till 31^st March 2021.

It was informed that the foreign policy would strive to make India a leader in the area of international trade and channel synergies gained through merchandise and services exports for growth and employment. It aims to make the Indian economy a USD 5 trillion. 

To achieve this goal of making India a USD 5 trillion economy in an expedited time frame would be by boosting exports, both merchandise and services by addressing systematically domestic and overseas constraints related to policy, regulatory and operational framework for bringing down the costs of transitions and enhancing ease of doing business, creating a low cost operating environment through cost effective, efficient and adequate logistical and utilities infrastructure.

By making improvements in the domestic manufacturing and services sector operations in combination with efficient infrastructure support by the government can result in correcting the imbalances within India.

Further, the District Export Hubs Initiative is set to be a vital component of this new policy. The Commerce department, through regional authorities of DGFT, has engaged with State/UT governments to take forward the initiative in the districts and also enable the implementation in a phased manner with an objective to mobilize the potential of every district to achieve its potential as an export hub.

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An Overview on Previous Foreign Trade Policy of India

As you would know that the previous FTP was implemented between 2015 and 2020. The main objective of this policy was to boost the initiative of Make in India. This previous policy merged five different schemes under Merchandise Export from India Scheme. These five different schemes mentioned above included the Market Linked Focus Product Scheme, Focus Market Scheme, Focus Product Scheme, Vishesh Krishi Gramin Upaj Yojana (VKGUY), and Infrastructure Incentive Scrip. Moreover, the Served from India Scheme was replaced by the Service Exports from India scheme.

Key highlights of the New Foreign Trade Policy

Some of the key highlights of this policy are as follows:

• The new policy is expected to boost exports;
• It is also expected to enhance the ease of doing business;
• It will bring improvement in the operations of the domestic and manufacturing services sector through infrastructure support;
• The policy is expected to bring changes in the regulatory and operational framework, thereby lowering transactional costs;
• The district export hub is slated to play a critical role in the new policy.
• Improvements in the domestic manufacturing and services sector operations in combination with efficient infrastructure support by the government can result in correcting the imbalances within India and will feed the trade policy.
• For formulating the policy, meetings are held with the stakeholders. A Board of Trade meeting was also held last year (December 2020), where vital inputs were provided from state government and other stakeholders. Further meetings also took place with the industry associations, Export Promotion Council, and with Chambers of Commerce for their inputs.
• A trade notice was issued for inviting suggestions from different stakeholders and over 200 suggestions were received. While formulating the policy, all these suggestions were examined.

How does the new Foreign Trade Policy plan to make India a USD 5 trillion economy?

For making India a USD 5 trillion economy in an expedited time frame, a key component would be boosting exports. It will include both services and merchandise.

It will be done by addressing systematically domestic and overseas constraints related to policy, regulatory, and operational framework to lower the costs of transaction and enhancing the ease of doing business. It will also lead to the creation of a low cost operating environment with the help of efficient utility and logistical infrastructure.

What are the challenges that India should address to be a USD 5 trillion economy?

The following challenges must be addressed by India in order to become a USD 5 trillion economy:

• Under-employment;
• Funding issues;
• Slowdown in agriculture;
• Export issues;
• Slow pace of infrastructure development.

If all these issues are addressed categorically and eliminated, then India can achieve its goal of being a USD 5 trillion economy. Though these challenges have been there for a long time, how India counters these will decide whether India would be able to achieve the target. If India grows at 12% nominal growth, then India should be able to achieve the target of being a USD 5 trillion economy by 2024.

Conclusion

The main mission of the new Foreign Trade Policy (FTP) is to make India a leader in International Trade in the next five years. It may be noted that the Indian FTP has been formulated for five years at a time. The new policy will come into effect from 1^st April 2021.

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