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India announces new Foreign Trade Policy in 2023

The Indian government finally released its new foreign trade policy on 31st March 2023. This policy is introduced with the motive to boost Indian exports after the slowdown in global trade due to the covid-19 pandemic. The new foreign trade policy of India mainly focuses on the globalization of trade in rupees.

India’s new trade policy will be implemented from 1st April 2023. The new policy has been released with the motive of expanding Indian exports to almost $2 trillion in the next 7 years i.e.; 2023. The new Indian Foreign Trade Policy is expected to be in action until 2028 as mentioned by the Directorate General of Foreign Trade (DGFT). The directorate also stated that as of now no end date has been finalized for this new foreign trade policy. The end date will be updated whenever it seems necessary.

The last FTP 2015-20 recorded the highest number of Indian exports. Therefore, India aims to surpass the record of $760 billion in the financial year 2022-23 in terms of its exports.

What is included in the new Foreign Trade Policy?

The Indian government had undertaken foreign policy changes back in 2015. No official announcement was made by the government about policy changes, but they were planning for a new trade policy keeping in mind the current global scenario.

Foreign Trade Policy 2023 was launched by Shri Piyush Goyal, the Union Minister of Commerce and Industry, Commoner Affairs, Food & Public Distribution, and Textiles. He said that unlike the previous 5-year plan FTPs, the new FTP 2023 is designed as a dynamic and open-ended policy that will help to fulfill all the emerging trade requirements.

FTP 2023 seeks to gain a lot of feedback from the exporters and other people related to the trade & commerce industry to streamline the trade process of the country. It aims to collect advice from the trade industry for updating India’s trade policies. During the FTP 2023 release, Indian Commerce Secretary Sunil Barthwal said that it is time for Indian exporters to become globally competitive and must stop relying on subsidies.

Approaches of the new Foreign Trade Policy 2023

  • FTP 2023 focuses on trade elements starting from Incentives to Tax Remission
  • The new trade policy aims for greater trade facilitation through technology, automation, and the continuous process of re-engineering.
  • It covers the promotion of exports through collaborations with exporters, districts, and states’ export promotion committees. 
  • It will focus on various emerging trade areas such as e-commerce exports, transforming districts as export hubs, and streamlining SCOMET policy.

The Key FTP 2023 Highlights

With the introduction of FTP 2023, various changes are going to be seen in the Indian export industry.

Here are the key FTP 2023 Highlights that have been issued by the Indian government to promote Indian exports on the global market.

Ease of doing business, reduction in transaction cost, and e-initiatives

  • On a primary basis, FTP has introduced the processing of extension and revalidation of trade applications in a single day, which currently takes three days to one month. Also, paperless or digital applications on the foreign trade policy and automatic system-based trade approvals are among the key initiatives that have been announced in the policy.
Types of Permission Processing Time According to the last FTP New FTPs processing time
Advanced Authorization Scheme 3 days to 7 days 1 day
Issuance of EPCG license 3 days to 7 days 1 day
Revalidation of authorization 3 days to 30 days 1 day
Export obligation period extension  3 days to 30 days 1 day

 

  • The application fee has been reduced for the exporters holding licenses under the Advance Authorization Scheme and EPCG scheme. It is likely to be beneficial for 50-60% of traders who are MSMEs.

Export Promotion Initiatives

  • There is a relaxation for the performance threshold on recognition to exporters through Status Holders. In FTP 2023, the threshold for acquiring Star House status has been reduced significantly. It has been done with the motive to allow exporters to get a higher status and reduce export transaction costs.
Star House Status Existing Export Performance Threshold Revised Export Performance Threshold
One star 3   3
Two star 25 15
Three-star 100 50
Four Star 500 200
Five Star 2000 800

 

  • Another important highlight of the new foreign trade policy is the internalization of rupees. Rupee payments will now be accepted under the Foreign Trade Schemes.
  • There has been a declaration of four new towns in India as export excellence in addition to 39 previously existing towns of export excellence. They are Faridabad, Moradabad, Mirzapur, and Varanasi.

Districts as Export Hubs

  • FTP 2023 aims to develop various districts of the country as export hubs. After proper identification of products and services in different districts in India, they will be converted into district export hubs. Various initiatives are going to be taken for converting districts and states into meaningful stakeholders.

E-commerce Exports

  • FTP 2023 is aiming to focus on all new emerging e-commerce exports. The ministry is formulating various e-commerce guidelines and has also been in consultation with other ministries. The policy is offering foreign trade policy advantages to online exports. It is even predicted that e-commerce exports are likely to increase to $200 billion in the upcoming 7-8 years.
  • Various e-commerce export hubs are going to be established with proper warehouse facilities for storing goods, customs clearance, and processing of returns.

Special one-time Amnesty Scheme

  • The new foreign trade policy includes the PM MITRA scheme. Exporters will be able to claim various added advantages under the Common Service Provider (CSP) of EPCG.
  • A wide variety of Battery Electric Vehicles (BEV), vertical farming equipment, wastewater recycling, rainwater filters, rainwater harvesting systems, and green hydrogen have been added to green technology products in this new policy. This makes these products eligible for reduced Export Obligation requirements under the EPCG scheme.
  • Another key highlight that will catch the attention of exporters in this newly drafted foreign trade policy is the extension of the Advanced Authorization Scheme for the garments and clothing industry. It is done to stimulate proper undertaking of Indian clothing exports.
  • The dairy industry has also been released from maintaining an average export obligation. It has been done with the motive to support dairy product exporters.

Special one-time Amnesty Scheme

  • The new policy has also introduced an amnesty scheme for a single-time settlement of default in export obligations by EPCG authorization and Advance authorization holding exporters. The amnesty scheme has been introduced for a limited period and its end date is 30.09.23. This scheme also states that all those pending cases of the default meeting in Export Obligation shall be made regular as per the customs duties payment which was exempted. The maximum interest of such exempted customs duties is 100%.
  • India’s new trade policy is providing relief to exporters who are not able to meet their EO against the EPCG Scheme and Advance Authorization Scheme. Also, the application fees have been reduced for both of these schemes.

Streamlining the SCOMET Policy

  • This time, the trade policy is also going to pay major attention to streamlining the SCOMET policy. This policy is meant for the export of dual-use items that come under special chemicals, organisms, materials, equipment, and technology (SCOMET).

Conclusion

The much-awaited Foreign Trade Policy broke on 31st March 2023. It changed the tradition of the FTP lasting for five years. This time the FTP has been planned with a long-term focus.

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