Context: The government has announced the new Foreign Trade Policy 2023 in order to boost exports amid slowing global trade. 

• While the new policy was expected to be in place until 2028, the DGFT said that there is no end date to the new foreign trade policy, it will be updated as and when required.

Background

• The current foreign trade policy (2015-20) is in force till March 31, 2022. The term of the previous five year policy had ended in March 2020. However, it has been extended repeatedly in wake of Covid outbreak and resulting lockdowns. The last extension was given in September 2022 till March 31, 2023.

Key Points

• "The policy will be dynamic. There is no end date to ensure when we have feedback, we will keep changing this document and update it. If there is a sector which feels this foreign trade policy (FTP) does not have anything for them, don't feel disappointed. Hence, the new trade policy is nibble and does not come with a five-year expiry date, government officials said.

• The current FTP 2015-20 – which expires on March 31, 2023 after having extended several times on demand of the industry because of global uncertainties such as Covid-19 pandemic and the Ukraine war.

• The new trade policy is taking forward the government’s ongoing efforts to boost export.

• The policy will continue to adopt consultative approach to resolve issues of trade and Industry with wider participation of states and districts in promoting exports from the grassroots.

• Further, the new policy will be shifting from incentives to a remission and entitlement-based regime.

Top takeaways from the policy

• FTP to provide the policy continuity and a responsive framework.

• Approach of FTP: From Incentive to Remission.

• Introduces scheme for remission of duties, taxes and govt levies on export goods.

• E-Certificate of Origin: Revamp of the e-Certificate of Origin platform proposed- to provide for self-certification of CoOs as well as automatic approval of CoOs, where feasible. Initiatives for electronic exchange of CoO data with partner countries envisaged.

• Digitisation of applications pertaining to FTP.

• Automatic system-based approval of FTP applications.

• Pilot introduced for cutting processing of applications related to advance authorisation to 1 day.

• Norms for recognition as Star Trading Houses eased.

• Promotes trade in Indian Rupee.

• Introduces provisions for merchanting trade.

• Dairy sector to be exempted from maintaining average export obligation * Battery electric vehicles; vertical farming equipment & green hydrogen eligible for reduced obligation under Export Promotion Capital Goods (EPCG) scheme

• Special advance authorization scheme extended for apparel & clothing sector

• Extends all FTP benefits to e-commerce exports

• Value limit for exports through courier service increased from Rs 5 lakh to Rs 10 lakh per consignment

• Focus on engaging with states & districts through Districts as Export Hubs initiative

• Aims at streamlining export of dual use items under SCOMET policy: FTP 2023 is also aimed at streamlining the SCOMET policy, which covers special chemicals, organisms, materials, equipment and technologies. The policy for the export of dual -use items under the Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) has been consolidated in one place for ease of understanding and compliance by the industry.

• Introduces amnesty scheme for one-time settlement of default in export obligation by advance authorisation and EPCG authorisation holders.

• FTP to be dynamic and responsive to the emerging trade scenario

• Restructuring of Department of Commerce on the anvil to make it future-ready

• India's new policy will also automate some trade approvals and cut charges for medium-sized and small businesses to secure some government-backed benefits.

Key Benefits

FTP 2023 to facilitate greater trade, boost manufacturing:

• The new foreign trade policy will facilitate greater trade, boost manufacturing and help in making the rupee a global currency.

• India’s foreign trade policy aims to make rupee stronger: Policymakers encouraged by the Rupee-Rouble trade with Russia for oil have made rupee trade the centrepiece of the Foreign Trade Policy 2023 (FTP). 

• There is no reason why its success cannot be replicated across sectors and countries. 

• This hawkishness would enable nations to break free of dollar hegemony on the trade front. Rupee trade with Iran when it was in the US doghouse served the two nations well.

FTP 2023 pragmatic, to increase country's share in global trade

• India’s new foreign trade policy is pragmatic and positive, and has set a stage for exporters to increase the country’s share in global trade, industry bodies and experts said.

• With the objective of raising the country’s outward shipments to USD 2 trillion by 2030, pushing the rupee trade and incentivising e-commerce exports.

FTP aims to spur e-commerce exports with series of measures

• The Foreign Trade Policy (FTP) 2023 has outlined a slew of measures like extending all FTP benefits to e-commerce exports, and doubling the value limit for exports through courier to Rs 10 lakh per consignment, with estimates pegging the potential of growth in e-commerce exports to USD 200-300 billion by 2030.

• To spur e-commerce exports, the FTP 2023 unveiled by Commerce Minister, also proposes to create a designated zone with a warehousing facility, to help e-commerce aggregators towards easy stocking, customs clearance and returns processing.

Sectors that will benefit from the new FTP 

• PM Mega Integrated Textile Region and Apparel Parks additional scheme to claim benefits under CSP.  

• The dairy sector gets benefits and will be exempted from maintaining the average export obligation.  

• Battery electric vehicles, vertical farming equipment are added to the green technology product. 

• Wastewater treatment and recycling, rainwater harvesting system added to green technology products.  

• Rainwater filters and green hydrogen added to green technology products.  

• Green technology products eligible for reduced export obligation requirement under the EPCG scheme. 

Road Ahead

• A “dynamic and responsive” Foreign Trade Policy (FTP) without any sunset clause  will be effective from April 1 with an aim to achieve $2 trillion goods and services exports by 2030 while encouraging trade settlements in rupee and adhere to the global principle that duties should not be exported.

• Foreign Trade Policy to be dynamic and responsive to the emerging trade scenario. Wider Engagement with States and Districts to promote exports from the grassroots. 

• Focus on E-commerce exports to streamline processes and make it easier for exports to grow in e-commerce space. Sector specific targets to achieve the goal of a one trillion-dollar merchandise exports by 2030. Consultative mechanism to resolve issues of trade and Industry. 

• Work towards making Indian Rupees a global currency and facilitating International Trade settlement in INR. Restructuring of Department of Commerce to make it future ready.

Conclusion

• India accounts for a minuscule portion of global trade. Its share in global merchandise exports stands at around 1.8%, while that in services is roughly 4%. There is considerable scope for improvement for the country on this count.

• The new policy needs to be supplemented with other measures to boost the country’s trade performance. These range from lowering import tariffs and ensuring a competitive exchange rate to signing broader and deeper free trade agreements.