The Foreign Trade Policy (FTP) 2023 was launched by India’s Commerce and Industry Minister, Piyush Goyal on March 31, 2023. The policy came into effect from April 1, 2023. It has replaced the FTP 2015-20, which was extended following its expiration in 2020 due to exceptional circumstances brought on by the COVID-19 pandemic. This policy has several new aspects such as a grassroots focus on boosting exports from different districts; an emphasis on cross-border e-commerce exports; trade facilitation to reduce the cost and time required to secure export approvals; merchanting promotion and encouraging more settlement of trade in the Indian Rupee (INR) are some of these, etc. In order to achieve the combined export objective of US$ 2 trillion by 2030, the FTP 2023’s stated purpose has been to promote quicker growth in India’s exports of commodities and services. India’s total exports, including both goods and services, had surpassed US$ 760 billion in 2023.
The key approach to the FTP 2023 has been based on
- incentive to remission;
- export promotion through collaboration—exporters, states, districts, Indian missions;
- ease of doing business (EoDB), reduction in transaction cost and e-initiatives; and
- emerging areas—e-commerce developing districts as export hubs and streamlining Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) policy.
The FTP 2023 is a document that facilitates exports by maintaining established programmes, while additionally being flexible and adaptable to changing trade needs. Changes were made to the FTP 2015–20 after its initial release, even without announcing the creation of a new FTP that would react dynamically to the emerging situations. Henceforth, the revisions of the FTP shall be done as and when required. It would further be an ongoing process to include trade and industry feedback in order to update FTP from time to time and streamlining the process.
The goal of the FTP 2023 would be process automation and re-engineering in order to facilitate it, making it easier for exporters to do business. Additionally, it would concentrate on new fields such as working with states and districts for promoting exports, enabling the export of e-commerce and dual-use high-end technological items under SCOMET. A one-time new amnesty scheme has been provided by the new FTP in order to allow exporters to close their outstanding authorisations and start afresh. By streamlining the well-known Export Promotion Capital Goods (EPCG) and Advance Authorisation programmes, the FTP 2023 would promote exports and make it possible for merchants for conducting trade from India.
Foreign Trade Policy 2023: Some Highlights
Process re-engineering and automation Exporters are putting more faith in automated IT systems with risk management systems for different kinds of approvals in the new FTP. The policy has placed strong emphasis on export promotion and development, shifting from an incentive-based system to one that is facilitative in nature and has been based on technological interface and collaborative concepts. Several of the ongoing schemes, such as Advance Authorisation, EPCG and others, would be maintained under FTP 2015–2020, in addition to substantial process re-engineering and technological enablement for facilitating exporters. Expanding upon prior ‘ease of doing business’ initiatives, FTP 2023 has codified implementation techniques in an online and paperless environment. It would be simpler for micro, small and medium enterprises (MSMEs) and others in obtaining export benefits with reduced fee structures and IT-based programmes.
In order to eliminate the requirement for a manual interface, duty exemption schemes for export production would, henceforth, be executed through regional offices in a rule-based IT system environment. All procedures in relation to the Advance and EPCG schemes, such as issue, re-validation, and extension for executive officer (EO), etc., would be addressed gradually, in a phased manner. Cases found within the risk management framework would be examined manually, but it is anticipated that most applicants are to be covered under the ‘automatic’ path initially.
Towns of export excellence Along with the 39 already designated towns, four additional towns—Faridabad, Mirzapur, Moradabad, and Varanasi—have further been designated as Towns of Export Excellence (TEE). The TEEs would benefit from Common Service Provider (CSP) incentives for export fulfilment under the EPCG Scheme, and would have priority access to export promotion funds under the Market Access Initiative (MAI) scheme. It has been anticipated that this would boost the export of handlooms, handicrafts, and carpets.
Recognition of exporters Exporter firms that would meet the requirements for ‘status’ based on their export performance would now be able to collaborate on capacity-building projects, according to best-endeavour basis. Two-star and higher status holders would be encouraged to offer interested individuals trade-related training based on a model curriculum, akin to the ‘each one teach on’ concept. This would assist India in developing a pool of skilled manpower before 2030 that could support a US$ 5 trillion economy. Recalibrating status recognition norms has made it possible for more exporting companies to secure rating of four and five stars, which has led to enhancement of branding opportunities in export markets.
Promoting export from the districts The Districts as Export Hubs (DEH) is an initiative which has been aimed to promote exports at the district level and accelerate the development of grassroots trade ecosystems. This is being carried out by the FTP in collaboration with the state governments. An institutional mechanism called the State Export Promotion Committee and the District Export Promotion Committee would be used to identify export-worthy goods and services. It would further assist in resolving concerns at the district level. Each district would need to create district-specific export action plans. These plans must detail their specific strategy for promoting export of specified goods and services.
Streamlining SCOMET policy India has begun to prioritise more on the ‘export control’ regime because India’s relationship and cooperation with export control regime countries has strengthened. Stakeholders have been made more aware of and knowledgeable about SCOMET. Hence, the policy framework is being strengthened in order to enable India to implement international treaties and agreements. In addition to enabling the export of controlled foods and technologies under SCOMET, a strong export control system would give the Indian exporters the access to dual-use, high-end goods, and technologies.
Facilitating e-commerce exports Exports of e-commerce has been a promising sector that calls for different policy responses than those from traditional offline trade. According to several estimations, the potential for e-commerce exports has been expected to reach between US$ 200 and US$ 300 billion by 2030. The goal and roadmap for creating e-commerce hubs, together with associated elements including export rights, book-keeping, payment reconciliation and return policies, had already been decided prior to the announcement of FTP 2024. To begin with, the consignment-wise cap on e-commerce exports through courier has already been raised from Rs 5 lakh rupees to Rs 10 lakh in the FTP 2023 itself. This cap would be further revised or eventually removed depending on the feedback from the exporters.
Indian Customs Electronic Gateway (ICEGATE) is the national portal of Indian Customs of Central Board of Indirect Taxes and Customs (CBIC) that provides e-filing services to the trade, cargo carriers and other trading partners, electronically. Exporters would be able to receive benefits under FTP once courier and postal exports are integrated with ICEGATE. The e-commerce working committee on exports and inter-ministerial deliberations have been giving its recommendations to comprehensively design the e-commerce policy while addressing the export/import ecosystem. The capability of craftsmen, weavers, clothing makers, gem and jewellery designers, and others would be built through extensive outreach and training initiatives, which would enable them to be integrated into e-commerce platforms and would promote exports.
Facilitation under Export Promotion of Capital Goods (EPCG) scheme Further rationalisation is being done with regard to the Export Promotion of Capital Goods (EPCG) scheme. This scheme would permit capital goods imports at zero customs duty for export production.
Some of the major implications of this scheme are:
The Prime Minister Mega Integrated Textile Region and Apparel Parks (PM MITRA) scheme has been included as an additional scheme which would make exporters eligible for gaining benefits under the EPCG’s Common Service Provider (CSP) scheme.
In order to encourage the dairy sector to modernise its technology, the dairy sector would be exempted from maintaining the average export obligation.
Under the EPCG scheme, certain products classified as ‘green technology products’, such as battery electric vehicles (BEVs) of all kinds, vertical farming machinery, wastewater treatment and recycling, rainwater harvesting systems and rain water filters, and green hydrogen, would be exempted from the export obligation requirement.
Facilitation under Advance Authorisation Scheme Domestic Tariff Area (DTA) units have advance approvals and have access to a scheme that is compatible to Special Economic Zones (SEZ) or Export Oriented Unit (EOU) schemes. These would be allowed duty-free import of raw materials for manufacturing export items. DTA means the whole of India outside the SEZ and the EOU. According to the Special Economic Zones (SEZ) Act 2005, the SEZ is a delineated duty-free area which has been deemed as a foreign territory for the purpose of trade operations, duties, and tariff. According to the FTP, EOU scheme is basically meant to export their entire production of goods and services. The EOU is governed by chapter of the FTP by the Director General of Foreign Trade (DGFT). However, the DTA unit has the flexibility to work both for domestic and export production.
Some facilitation elements
- In order to expedite the execution of export orders, the special advance authorisation scheme (SAAS) has been extended to the apparel and clothing sector on a self-declaration basis. The norms for the same would be set within the fixed timeframe. The SAAS allows duty-free import of input fabric, interlining for shipping articles of apparel and clothing accessories. The authorisation is issued based on the standard input-output norms, fixed by the Director General of Foreign Trade (DGFT).
- At present, in addition to authorised economic operators, status holders with two stars or higher further enjoy the benefits of the self-ratification scheme for fixing input-output norms. Under the self-ratification scheme, an advanced licence would be provided by the DGFT based on the self-declaration without any direct involvement of the norms committee in Delhi for ratification of norms.
Merchanting trade The FTP 2023 has included measures for merchanting trade in an effort to turn India become a hub for international trade.
In merchanting trade, an Indian company purchases goods from a person of a foreign country, (for instance Country A), and sell the very same goods to a purchaser of another foreign country (for instance Country B), without the goods physically entering India. In merchanting trade, India only acts as an intermediary.
Under this new export policy, merchanting trade of restricted and prohibited items would now be possible. However, this would not apply to products or items that have been listed in the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) and SCOMET lists. Additionally, it would be subject to compliance with the RBI guidelines. This would eventually enable Indian entrepreneurs to transform specific locations, such as Gujarat International Finance Tec-City (GIFT City), into significant commerce hubs, similar to what is seen in Dubai, Singapore, and Hong Kong.
Amnesty scheme To help ease the problems faced by exporters, the government has steadfastly dedicated to lowering litigation and developing relationships based on trust. To address default on export obligations, the government has created a unique one-time amnesty scheme under the FTP 2023, in keeping with the Vivaad se Vishwaas strategy. This has been aimed to settle tax disputes amicably. This scheme has been targeted to provide relief to those exporters who have been burdened by excessive duty and interest charges related to pending cases. It would further bring relief to exporters who have been unable to fulfil their duties under the EPCG and advance authorisations. Payment of all customs duties that were exempted in proportion to the unfulfilled export obligation (EO) would regularise all outstanding cases of default in satisfying the EO of the authorisations specified. Under this scheme, the interest payable would be capped at 100 per cent of these exempted duties. However, there would be no interest due on the portion of special additional customs duty and additional customs duty which would relieve exporters as their interest burden would be significantly reduced.
Conclusion
According to industry experts, though India’s FTP 2023 has addressed a wide range of issues, India has to concentrate on solid macroeconomic foundations in order to reach its US$ 2 trillion export target. The stability prices and the savings rate must be the main priorities in achieving this objective. Increased fiscal discipline and appropriate private sector incentives should be assessed in order to improve this crucial factor. Conversely, controlling inflation would require both fiscal discipline and sound monetary policy, as rising inflation would expose the currency to further depreciate.
Further, the FTP 2023 has been silent on efforts for boosting services exports as Indian services export have been doing remarkably well. Services exports in 2021–22 accounted for over 70 per cent of goods exports at US$ 372 million, valued at almost US$ 270 million. Despite this outstanding accomplishment, there has not been much in the way of support for services exports from the FTP 2023. Experts feel that the goal of achieving US$ 2 trillion of exports by 2030 would not be possible without a sizeable contribution from service experts. By increasing its exports’ resilience to global shocks, diversification could help India become less dependent on a small number of industries and markets.
Having said all this, the FTP 2023 is a dynamic policy document that seeks to increase India’s exports and foster its multifaceted growth in the future. The policy, which places a strong focus on collaboration, technological interface, and ease of doing business, is anticipated to support the expansion of the export sector. It would foster an atmosphere that would make it easier for MSMEs and other companies to gain from exports. Overall, FTP 2023 serves as a blueprint for India’s exports to soar to new heights and establish the country as a global leader in export sector.
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