T he Government of India, in its recent release of the new Foreign Trade Policy (FTP) 2023 coming in effect from 2023-24, has already generated much furore. The Ministry of Industry and Commerce intends to boost the country’s exports of goods and services to $2 trillion by 2030, from the current level of $765 billion. Hence, we perused the actual policy change to see if that is indeed the direction this FTP intends to go towards. There has been a lot of talk lately around the internationalisation of rupee-based trade, e-commerce exports, ease of doing business, and emerging areas of export potential. The FTP now appears to put these objectives in the heart of its changes. Hereinafter, let’s discuss the main features and implications of the FTP 2023 for India’s trade sector and major challenges and opportunities that the Government of India intends to create while developing India’s growing role in global trade.
At the outset, the FTP 2023 seems to have deviated from its regular 5-year structural change approach to a perennial policy – clearly intended to incorporate more dynamism in policymaking. One must look at this with certain amount of rational optimism, as potential feedback from the trade and industry could be regularly incorporated into the heart of the policy.
Incentives to remission
There appears to be a clear shift from incentives to remission of taxes and duties which should align this policy with the Agreement on Subsidies and Countervailing Measures to which India is a signatory. What remains to be seen is the cohesion with which the Ministry of Commerce and Industry and the taxmen under Ministry of Finance works in implementing the objectives of the policy, as this has been a perennial pain point for exporters in the past.
Easy business for exporters too?
This FTP intends to reduce transaction costs by reducing composition fees in certain schemes, simplifying procedure, and integrating various timelines into the policy. Export Obligation extensions have also been harmonised on payment of a composition fee only rather than with enhancement of export obligation. This move will no doubt benefit exporters with sufficient working capital.
To further the stated objectives of being a facilitator of export and imports, two inter-ministerial bodies will be set up, namely, the National Committee on Trade Facilitation (NCTF) and the Inter-Ministerial Committee for MSME to introduce further transparency and improve ease of doing business.
The policy also streamlines the SCOMET (Special Chemicals, Organisms, Materials, Equipment and Technologies) policy, which regulates the export of dual-use items. The introduction of voluntary disclosure scheme under the SCOMET policy seems to allow mitigation of stricter offences under the Foreign Trade (Development and Regulation) Act, 1992, however with an increased focus on data-collection by the government.
There is also a clear move to close legacy disputes with the introduction of an amnesty scheme, by way of an public notice, for a one-time settlement of export obligation defaults under the EPCG and Advance Authorization Schemes.
Digital commerce: Emerging focus
The policy, on expected lines, has earmarked e-commerce as a key area for export growth. This thrust is most clear with an introduction of an entire chapter dedicated to extend policy benefits to e-commerce export of goods and services. Key areas such as a simplified registration process, single window clearance, digital certification, creation of e-commerce export hubs (ECEHs) and online grievance redressal mechanism has been highlighted for e-commerce players. The policy promotes the internationalisation of rupee trade, by allowing exporters to receive payments in Indian currency from specified countries. It would be interesting to see how this plays out, with the background of the pilot of the e-rupee by the Reserve Bank of India in 2022 and talks ongoing with estimated 30 countries for adoption of UPI.
Decentralisation and collaboration
Decentralisation of export appears to be firmly on the cards with a focus on developing districts as export hubs. The policy intends to offer collaboration with district hubs by identifying their potential products and services and providing them with necessary infrastructure and support. Certain Towns of Export Excellence have been identified, such as Faridabad, Moradabad, Mirzapur, and Varanasi, with a clear vision to provide support for exports of handlooms, handicrafts, apparel products, etc. The FTP further encourages exporters to collaborate with Indian missions abroad for market access and promotion.
In conclusion, the FTP 2023 is set to be yet another cog in the wheel to facilitate India’s transition to a developed economy by 2030. What remains to be seen is whether the optimal objectives of competitiveness in the global market, diversification of India’s export basket, and creation of employment opportunities will be met. Atmanirbhar Bharat and Amrit Kaal may seem jingoistic in the absence of concrete steps. The FTP 2023 appears to somewhat bridge that gap with a robust framework for action in export promotion going forward.