India's Foreign Trade Policy

India's Foreign Trade Policy (FTP): An Overview

These notes provide a concise yet informative overview of India's Foreign Trade Policy (FTP), covering its objectives, key features, schemes, and impact on the Indian economy.

What is India's Foreign Trade Policy (FTP)?

• Definition: The Foreign Trade Policy (FTP) is a set of guidelines and policies formulated by the Directorate General of Foreign Trade (DGFT), an office under the Ministry of Commerce and Industry, Government of India.
• Purpose: It regulates exports and imports to promote a balance in trade and foster economic growth.
• Regular Updates: The FTP is typically updated every five years to align with current economic needs and international trade standards. Example: FTP 2023-2028.

Objectives of India's FTP

• Boost Exports: Increase the volume and value of exports from India.
• Minimize Trade Deficits: Reduce the gap between imports and exports.
• Enhance Competitiveness: Improve the quality and competitiveness of Indian goods and services in global markets.
• Strengthen Trade Agreements: Expand and solidify trade relationships with other countries through bilateral and multilateral agreements.
• Promote Entrepreneurship: Encourage self-reliance and provide a platform for Indian businesses to flourish.

Historical Background

• 1991: India's first major liberalization of its FTP, marking a shift towards a more open economy after economic reforms.
• 2000s: Aligning with World Trade Organization (WTO) rules, leading to gradual changes in policy.
• 2015-20: Focus on Special Economic Zones (SEZs) and the Export Promotion Capital Goods (EPCG) scheme.

Key Features of FTP 2023

• Validity: Effective from April 2023 to March 2028.
• Emphasis on 'Atmanirbhar Bharat': Focus on self-reliance and promoting domestic manufacturing.
• Transition to Remission-Based Schemes: Shift from direct incentives to refund-based schemes like RoDTEP.
• Boost to E-commerce Exports: Simplification of policies and support for digital trade.

Pillars of FTP 2023

1. Simplification of Processes: Focus on paperless filing through the DGFT portal.
2. MSME Focus: Promoting small exporters using platforms like the Open Network for Digital Commerce (ONDC).
3. Global Access: Leveraging Free Trade Agreements (FTAs) with nations like the UAE, UK, and Australia.
4. Ease of Doing Business: Reducing procedural delays and facilitating trade.

Key Schemes under FTP

• Remission of Duties and Taxes on Exported Products (RoDTEP): Refunds embedded taxes (e.g., electricity duty, VAT on fuel) on exported products.
  • Example: A garment exporter gets a refund on taxes paid on the electricity and fuel used in the manufacturing process.
• Export Promotion Capital Goods (EPCG) Scheme: Allows duty-free import of capital goods (machinery, equipment, tools) to produce goods for export.
  • Example: A pharmaceutical company imports advanced machinery without duty to manufacture drugs for export.
• Advance Authorization Scheme: Permits duty-free import of raw materials for manufacturing products that will be exported later.
  • Example: A leather goods manufacturer imports raw hides without duty for producing leather products for export.

Special Focus on MSMEs

• Integration with ONDC: Helping MSMEs reach more customers.
• Capacity-Building Programs: Providing training and support for MSMEs to improve their export readiness.
• Export Promotion Drives: Conducting events and campaigns to encourage small businesses to participate in export activities.

Incentives for Digital Trade

• Simplified policies: Easier regulations for e-commerce exports.
• Digital Payments: Encouraging digital payment methods via online gateways.
• Marketplace Support: Assisting online sellers with access to global export marketplaces.

Sector-Specific Policies

• Key Sectors: Focused support for industries like textiles, pharmaceuticals, electronics, and agriculture.
• SEZs & EOUs: Encouraging exports via Special Economic Zones and Export-Oriented Units.

Role of SEZs in FTP

• Export Contributions: SEZs significantly contribute to India’s overall exports.
• Simplified Regulations: Easier guidelines for units within SEZs under FTP 2023.
• Logistics: Enhancing multi-modal logistics and export hubs within SEZs.

Bilateral and Multilateral Trade Agreements

• Trade Partners: Trade deals with UAE, Australia, and Japan, among others.
• Impact of FTAs: Boosting exports by reducing trade barriers like tariffs.
• Increased Competitiveness: Helping Indian businesses to compete globally.

Promoting Make in India

• Alignment: FTP policies are aligned with the 'Make in India' and 'Atmanirbhar Bharat' initiatives.
• Manufacturing Hubs: Setting up export-oriented manufacturing hubs.
• Value-Added Exports: Incentives for goods with high domestic value addition, promoting self-reliance.

Challenges in Implementation

• Compliance: Adhering to international trade laws and WTO norms.
• Logistics Costs: High costs of transportation affecting export competitiveness.
• Global Conditions: Impact of global economic volatility and currency fluctuations.

Monitoring and Evaluation

• DGFT Role: The DGFT monitors the implementation of FTP policies.
• Trade Data: Analyzing trade data for real-time adjustments and policy evaluation.
• Digital Tools: Using digital tools to track progress and analyze the impact of policies.

Latest News and Updates

• India’s Trade Data (2023-24):
  • Merchandise Exports: $450 billion
  • Services Exports: $326 billion
• Focus Areas: Reducing trade deficits with China and expanding trade with Africa and Latin America.
• India-UAE CEPA: Has had a positive impact on gem and jewelry exports
• Australia-India ECTA: Increased trade ties between both countries.

Environmental Sustainability

• Green Trade Initiatives: Promoting environmentally friendly trade practices.
• Renewable Energy Exports: Encouraging exports of sustainable and renewable energy products.
• Eco-Friendly Practices: Incentives for adopting eco-friendly manufacturing methods.

Digitization in FTP

• e-BRC Module: Introduced the 'e-BRC Module' for exporters to generate and manage Electronic Bank Realization Certificates online.
  • Definition of eBRC: A digital document that confirms an exporter has received payment for exported goods or services.
• Online Issuance: Online issuance of export documents through the DGFT portal.
• Simplified Procedures: Faster processing of trade transactions through digitization.

Impact of FTP on India's Economy

• GDP Growth: Contribution to GDP growth through increased export activities.
• Job Creation: Creating employment, particularly in export-oriented sectors like IT and textiles.
• Foreign Exchange Reserves: Enhanced foreign exchange due to service sector exports.

Role of Export Promotion Councils

• Key Councils: Councils like EEPC, AEPC, and Pharmexcil.
• Exporter Support: Supporting exporters with market intelligence, trade fairs, and policy advocacy.

Government Initiatives for Exporters

• GST Refunds: Simplified GST refunds for exporters.
• Financial Assistance: Export credit guarantee schemes to assist with financing.
• Skill Development: Training programs to enhance export competitiveness.

Role of Logistics and Infrastructure

• Multi-modal Logistics Parks: Streamlining trade with multi-modal logistics parks.
• PM Gati Shakti: Improving trade efficiency through the PM Gati Shakti Plan for infrastructure development.
• Port Efficiency: Reducing turnaround time at ports with digitization and automation.

Comparison with Other Countries

• Benchmarking: Comparison of India’s FTP with those of China and ASEAN countries.
• Lessons: Learning from global trade leaders.
• Strategies: Enhancing export competitiveness through best practices.

Success Stories

• Growth Sectors: Significant growth in exports from sectors like IT and pharmaceuticals.
• E-commerce Startups: Increasing role of startups in boosting e-commerce exports.
• Make in India: Achievements under the Make in India initiative, boosting domestic manufacturing and exports.

Challenges in India’s Foreign Trade

• Merchandise Deficit: Persistent trade deficits in merchandise trade.
• Geopolitics: Geopolitical issues impacting supply chains and trade.
• Currency Volatility: Currency fluctuations impacting export pricing and competitiveness.

Recommendations for Improvement

• Diversification: Diversify export markets beyond traditional regions.
• Technology Focus: Enhance technological adoption and innovation in exports.
• Trade Diplomacy: Strengthen trade partnerships with emerging markets.

This summary provides a concise overview of India's Foreign Trade Policy, its significance, and its impact on the Indian economy. It serves as a starting point for a deeper understanding of India's role in global trade.