Foreign Trade Policy 2023 [UPSC Notes]

The Minister of Commerce & Industry, Consumer Affairs & Food & Public Distribution and Textiles, Government of India has recently unveiled the new Foreign Trade Policy (FTP), 2023. In this article, you can read all the important features of the Foreign Trade Policy, 2023 and how it will impact the Indian economy. This topic is relevant for the IAS exam Indian economy segment.

Foreign Trade Policy 2023 Objectives

The objectives of the 2023 Foreign Trade Policy (FTP) are as under.

• To integrate India with the global markets: As India is on the path to becoming a developed nation by 2047, the policy lays down a blueprint to integrate India with the global markets and make it a reliable and trusted trade partner.
• To build a future-ready India: To build a future-ready India and to fulfil India’s strategic vision of making India one of the top exporting nations in the ‘Amrit Kaal’.
• To create an enabling ecosystem: The approach of this FTP is to gradually move away from an incentive-based regime and create an enabling ecosystem to support the philosophy of ‘Atma Nirbhar Bharat’ and ‘Local goes Global’.
• To collaborate with state governments: To build and encourage export promotion at the district level.
• To triple India’s goods and services exports: The new policy will replace the existing policy that had been in place since 2015. The new policy aims to almost triple India’s goods and services exports to $2 trillion by 2030, from an estimated $760 billion in 2022-23.

Foreign Trade Policy 2023 Highlights

Trade Facilitation and Ease of Doing Business

• National Committee on Trade Facilitation (NCTF): India has ratified the World Trade Organization’s Trade Facilitation Agreement (TFA) in April 2016. To facilitate coordination and implementation of the TFA provisions, an inter-ministerial body i.e. the National Committee on Trade Facilitation (NCTF) has been constituted.
• DGFT as a facilitator of exports/imports: DGFT has the commitment to function as a facilitator of exports and imports. The focus is on good governance, which depends on efficient, transparent and accountable delivery systems.
• Export of perishable agricultural products: To reduce transaction and handling costs, a single window system to facilitate the export of perishable agricultural produce is being facilitated through the Agricultural and Processed Food Products Export Development Authority (APEDA). 
• Niryat Bandhu: As a hand-holding scheme for new export/import entrepreneurs, DGFT is implementing the Niryat Bandhu Scheme for mentoring new and potential exporters on the intricacies of foreign trade.
• Online facility for e-Certificate of Origin (e-CoO): DGFT has created a common digital platform for the issue of Preferential and Non-Preferential Certificate of Origin (e-CoO) by designated agencies.

General Provisions regarding Imports and Exports

• Authority to specify procedures: DGFT
• Importer-Exporter Code (IEC): An IEC is a 10-character alpha-numeric number allotted to an entity (firm/company/LLP, etc.) and is mandatory for undertaking any export/import activities.

Developing districts as export hubs

• The FTP aims at building partnerships with State governments and taking forward the Districts as Export Hubs (DEH) initiative to promote exports at the district level and accelerate the development of a grassroots trade ecosystem. 

Duty Exemption/Remission Schemes

• Duty Exemption Schemes. The Duty Exemption schemes consist of the following: Advance Authorisation (AA) (which will include Advance Authorisation for Annual Requirement) & the Duty-Free Import Authorisation (DFIA).
• Duty Remission Scheme. Duty Drawback (DBK) Scheme, administered by the Department of Revenue.
• Scheme for Rebate on State and Central Taxes and Levies (RoSCTL), as notified by the Ministry of Textiles. 
• Schemes for Remission of Duties and Taxes on Exported Products (RoDTEP), notified by the Department of Commerce and administered by the Department of Revenue.
• Duty-Free Import Authorisation Scheme (DFIA):
  • Duty-Free Import Authorisation is issued to allow duty-free import of inputs. In addition, the import of oil and catalyst which is consumed/utilised in the process of production of export products may also be allowed. 
  • Import of Tyres under the DFIA scheme is not allowed.

Export Promotion Capital Goods Scheme (EPCG)

• Facilitation under the Export Promotion of Capital Goods (EPCG) Scheme:
  • The EPCG Scheme, which allows the import of capital goods at zero customs duty for export production, is being further rationalised. Some key changes being added are: 
    • The PM MITRA scheme has been added as an additional scheme eligible to claim benefits under the CSP (Common Service Provider) Scheme of the Export Promotion Capital Goods Scheme (EPCG).
    • Battery Electric Vehicles (BEV) of all types, Vertical Farming equipment, Wastewater Treatment and Recycling, Rainwater harvesting system and Rainwater Filters, and Green Hydrogen are added to Green Technology products – will now be eligible for reduced Export Obligation requirement under EPCG Scheme.
• Amnesty Scheme:
  • Amnesty Scheme under the FTP 2023 to address default on Export Obligations.
  • This will provide relief to exporters who have been unable to meet their obligations under EPCG and Advance Authorizations, and who are burdened by high duty and interest costs associated with pending cases.

Export Oriented Units (EOUS), Electronics Hardware Technology Parks (EHTPS), Software Technology Parks (STPS) And Bio-Technology Parks (BTPS):

• Units undertaking to export their entire production of goods and services (except permissible sales in DTA), may be set up under the Export Oriented Unit (EOU) Scheme, Electronics Hardware Technology Park (EHTP) Scheme, Software Technology Park(STP) Scheme or Bio-Technology Park (BTP) Scheme for manufacture of goods.
• The objectives of these schemes are to promote exports, enhance foreign exchange earnings, attract investment for export production and employment generation.
• Facilitation under Advance Authorization Scheme:
  • Advance Authorisation Scheme accessed by DTA (Domestic tariff area) units provides duty-free import of raw materials for manufacturing export items and is placed at a similar footing to EOU and SEZ Scheme.

Quality Complaints and Trade Disputes

• Complaints/Disputes between two or more Indian entities are not covered under this mechanism. Similarly, complaints/disputes between two or more foreign entities are also not covered.
• Mechanism for handling Complaints/Disputes:
  • Committee on Quality Complaints and Trade Disputes (CQCTD): It will be constituted in the Regional Authorities (RAs) of DGFT.
  • Composition of the CQCTD: The CQCTD would be constituted under the Chairpersonship of the Head of Office. 
  • Functions of CQCTD: The Committee (CQCTD) will be responsible for enquiring and investigating all quality-related complaints and other trade-related complaints falling under the jurisdiction of the respective RAs.

Promoting Cross-border Trade in Digital Economy

• Facilitating E-Commerce Exports:
  • FTP 2023 outlines the intent and roadmap for establishing e-commerce hubs and related elements such as payment reconciliation, bookkeeping, returns policy, and export entitlements. 
  • The consignment-wise cap on E-Commerce exports through courier has been raised from ₹5 Lakh to ₹10 Lakh in the FTP 2023.
  • Dak Ghar Niryat Kendras shall be operationalised throughout the country to work in a hub-and-spoke model with Foreign Post Offices (FPOs) to facilitate cross-border e-Commerce and to enable artisans, weavers, craftsmen, MSMEs in the hinterland.
  • Integration of Courier and Postal exports with ICEGATE will enable exporters to claim benefits under FTP.

SCOMET: Special Chemicals, Organisms, Materials, Equipment And Technologies:

• Streamlining SCOMET Policy:
  • More emphasis on the “export control” regime for better integration with export control regime countries. 
  • A robust export control system in India would provide access to dual-use high-end goods and technologies to Indian exporters while facilitating exports of controlled items/technologies under SCOMET from India.

Other initiatives by the Government of India: 

• The Government has undertaken several measures like opening new sectors for FDI, improving the business environment, removing regulatory barriers, recognizing startups and introducing schemes like Production Linked Incentive Scheme to enhance production and productivity, attract investments and create jobs. 
• As a result of its focused efforts, India achieved its highest-ever exports of over USD 676 billion in 2021-22, well on the way to achieving USD 750 billion in 2022-23.
• India has inked 13 Free Trade Agreements along with six limited-coverage Preferential Trade Agreements and is negotiating new trade agreements with the European Union, the UK, Canada and other countries on a fast-track basis. 
• Over the next five years, the Government plans to focus on introducing path-breaking reforms to strengthen its relations with different countries, which will help in setting a robust foundation to achieve its strategic vision of becoming an export hub globally.

Impact of New Foreign Trade Policy 2023 on Export

• FTP 2023 has some provisions that will specifically help MSMEs. 
  • It has reduced the threshold of minimum exports required for the recognition of exporters as status holders. 
  • Now, many smaller exporters can achieve higher status and avail of benefits that will reduce transaction costs. User charges have also been reduced for MSMEs under the popular Advance Authorisation and EPCG schemes and all charges have been brought within ₹5,000. It will boost MSME exports.
• Initiatives such as districts as export hubs and the promotion of e-commerce exports have the potential of translating into more exports.
• The FTP has also tried to make life easier for exporters and traders, specifically MSMEs, in a number of ways. Measures have been announced to improve the ease of doing business through a reduction in transaction costs and e-initiatives.
• Since fiscal incentives are out of the reckoning because of WTO restrictions, FTP 2023 focuses on the continuation of duty remission schemes that are WTO compliant. That the FTP does not come with an end date is of great comfort to the industry. 
• No uncertainty regarding the continuation of input duty remissions schemes.
• RoDTEP and RoSCTL, and timely payments by the government, will help exporters do their business with more confidence.
• Amnesty Scheme under the FTP 2023 will address default on Export Obligations and boost exports.

Conclusion:

• The $2 trillion target for exports set for 2030 endorsed by FTP 2023 comprises $1 trillion of goods exports and $1 trillion of services exports.
• If the government stays vigilant and updates the FTP, responding to the needs of exporters, it could play an important role in helping meet the $2 trillion export target. 

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