India's Foreign Trade: Policy and trends | Management Optional Notes for UPSC PDF Download

Why in News?

1. The Union Minister launched the Foreign Trade Policy (FTP) 2023, starting from April 1, 2023.

2. FTP 2023 is a set of rules and plans that help businesses in India sell their products to other countries. It has both proven strategies and the ability to adapt to changing trade needs.

3. The policy aims to support and boost exports, making it easier for businesses to sell their goods internationally.

4. It's like a guidebook that continues successful methods from the past and is flexible enough to adjust to the current demands of trade.

5. The FTP 2023 is designed to help Indian businesses be competitive in the global market and bring in more opportunities for growth.

In simple terms, the Foreign Trade Policy 2023 is a plan to make it easier for Indian companies to sell their products to other countries, and it includes both proven strategies and the ability to adapt to new trade requirements.

What are Details of FTP 2023?

1. Basic Idea:

   • The policy is all about building trust and partnerships with exporters.
   • Aims to simplify business processes through modernization and automation, making it easier for exporters.

2. Key Approach – Four Pillars:

   • Incentives and Remission:
     • Offering rewards to encourage exports.
   • Export Collaboration:
     • Promoting exports by working together with exporters, states, districts, and Indian missions.
   • Ease of Doing Business:
     • Making business smoother, reducing costs, and introducing electronic initiatives.
   • Emerging Areas:
     • Focusing on developing E-Commerce districts as export hubs and improving policies for special chemicals, organisms, materials, equipment, and technologies.

3. Goals and Targets:

   • Export Ambition:
     • Government aims to boost India's overall exports to $2 trillion by 2030.
   • Equal Contributions:
     • Both goods (merchandise) and services sectors are expected to contribute equally.

4. Currency Use Encouragement:

   • New Framework:
     • RBI introduced a new payment settlement framework in July 2022.
     • Aims to encourage the use of Indian currency in cross-border trade.
   • Trade Surplus Advantage:
     • Particularly beneficial for countries where India has more exports than imports.

What are the Salient or Important features of FTP 2023?

1. Targets $2 trillion exports by 2030
2. Continuous and responsive framework with no end date
3. Making rupee a global currency
4. Making India a trade hub
5. Digitisation and faster processing of applications
6. Amnesty scheme for shortfall in export obligations
7. Restructuring of Department of Commerce
8. Over 50% reduction in threshold for recognition of star trade houses

Process Re-Engineering and Automation

1. Promoting Exports:

   • The policy focuses on helping businesses sell more products to other countries.
   • It's moving from just giving rewards to creating a system that supports and uses technology, along with collaboration.

2. Cost Reduction for Small Businesses:

   • Fees are reduced, and new technology plans are introduced.
   • This makes it easier for small businesses, like MSMEs, to get the benefits of selling products internationally.

3. Automated Duty Exemption:

   • If you're making things for export and need duty exemptions, it's now handled by Regional Offices using a computer system.
   • No more paperwork; everything is done more efficiently with technology.

Towns of Export Excellence (TEE)

1. New Designation:

   • Faridabad, Mirzapur, Moradabad, and Varanasi are now recognized as special towns for exporting, in addition to the existing 39 towns.

2. Priority Benefits for Special Towns:

   • These special towns (called TEEs) get first access to funds that promote exports under the MAI scheme.
   • They can also enjoy benefits from a Common Service Provider for export needs under the EPCG Scheme.

Recognition of Exporters

1. Exporter Recognition:

   • Exporter firms, based on their export performance, will now get a special "status."

2. Partnership for Learning:

   • Those with a "2-star" or higher status are encouraged to help others learn about trade through a "each one teach one" initiative.
   • This means they share their knowledge and skills with interested individuals.

3. Revised Recognition Rules:

   • The rules for getting recognized have been changed to make it easier for more exporting firms to achieve higher ratings (4 and 5 stars).
   • This opens up better branding opportunities for them in export markets.

Promoting Export from the Districts

1. Building Partnerships:

   • The FTP (Foreign Trade Policy) wants to work closely with State governments to boost exports.
   • It's pushing forward a plan called Districts as Export Hubs (DEH) to promote exports at the local district level.

2. Local Trade Ecosystem Boost:

   • The goal is to speed up the development of trade activities at the grassroots level.
   • This involves identifying products and services with export potential in each district.

3. Institutional Mechanism for Solutions:

   • To address concerns and find export-worthy items, there will be special committees at the State and District levels.
   • These committees, called State Export Promotion Committee and District Export Promotion Committee, will work on resolving issues and promoting local exports.

4. District-Specific Plans:

   • Each district will have its own plan, called a district-specific export action plan.
   • These plans will outline strategies unique to each district to promote and boost the export of identified products and services.

Streamlining SCOMET Policy

1. Focus on Export Control:

   • India is giving more importance to its "export control" system, especially as it aligns with other countries in this regard.

2. Increased Awareness of SCOMET:

   • More people involved (stakeholders) now understand and are aware of SCOMET (Special Chemicals, Organisms, Materials, Equipment, and Technologies).

3. Enhancing Policy Strength:

   • The rules and guidelines for export control are being made stronger to effectively follow international agreements and treaties that India has entered into.

4. Benefits of Robust System:

   • A strong export control system will allow Indian exporters to access advanced goods and technologies that can have both civilian and military uses.
   • This system also helps in exporting controlled items and technologies listed under SCOMET from India.

Facilitating E-Commerce Exports

1. Big Growth Potential:

   • Experts predict that e-commerce exports could be worth between USD 200 to USD 300 billion by 2030.

2. E-commerce Plans in FTP 2023:

   • The Foreign Trade Policy (FTP) 2023 talks about the plan and steps for creating e-commerce hubs.
   • It includes setting up systems for payment reconciliation, book-keeping, returns policy, and export entitlements.

3. Changes in Export Limits:

   • To kickstart this, the maximum value for each e-commerce export package sent by courier has been increased from ₹5 Lakh to ₹10 Lakh in the FTP 2023.

4. Possible Future Changes:

   • Depending on what exporters say and how things go, this limit might be changed again or even removed in the future.

Facilitation under (EPCG) Scheme

1. EPCG Scheme Simplification:

   • The EPCG Scheme, allowing duty-free import of capital goods for export production, is getting more straightforward.

2. New Inclusions for Benefits:

   • The PM MITRA scheme for textiles is now part of the CSP Scheme under EPCG, offering additional benefits.
   • The dairy sector is exempted from meeting certain export obligations, supporting technological upgrades.

3. Expanding Green Technology Eligibility:

   • Certain products like Battery Electric Vehicles (BEV), Vertical Farming equipment, Wastewater Treatment and Recycling systems, Rainwater Harvesting setups, Rainwater Filters, and Green Hydrogen are now considered Green Technology.
   • These products qualify for reduced Export Obligation requirements under the EPCG Scheme.

Facilitation under Advance authorization Scheme

1. Advance Authorisation Scheme:

   • This scheme lets domestic manufacturers (DTA units) bring in raw materials duty-free for producing goods meant for export.
   • It's treated similarly to the schemes for Export-Oriented Units (EOU) and Special Economic Zones (SEZ).

2. Special Scheme for Apparel and Clothing:

   • An extension of the Advance Authorisation Scheme is available for the Apparel and Clothing sector.
   • It allows quick processing of export orders through self-declaration.

3. Streamlined Norm Fixation Process:

   • The Self-Ratification Scheme for setting standards for inputs and outputs now includes businesses with a 2-star rating or higher.
   • Additionally, Authorized Economic Operators can also benefit from this scheme.

Amnesty Scheme

1. Online Portal Launch:

   • An online platform will be introduced for exporter registration.
   • Exporters will have six months to take advantage of the scheme.

2. Coverage of Pending Cases:

   • The scheme includes all cases where exporters haven't met their export obligations as per their authorizations.
   • These cases can be resolved by paying all customs duties that were exempted due to unmet export obligations.

What About Previous Trade Policy?

1. Initial Target:

   • The old foreign trade policy aimed to achieve exports worth $900 billion by 2020.

2. Extended Goal and Timeline:

   • The target was extended for three more years until March 2023 along with the policy.

3. Current Outlook:

   • However, it's anticipated that India might conclude the fiscal year 2022-23 with total exports ranging between $760 to $770 billion.

4. Comparison with Previous Year:

   • This is an increase from the $676 billion recorded in the previous fiscal year 2021-22.

In simpler terms, the old plan wanted to reach $900 billion in exports by 2020. They extended this goal until 2023, but it looks like India might finish with around $760 to $770 billion in exports by March 2023, which is higher than the $676 billion in the previous year.