Foreign Trade Policy 2023

April 4, 2023

The Indian government has recently announced its new Foreign Trade Policy (FTP), which replaces the previous one launched in 2015. The new FTP came into effect on April 1, 2022, and is aimed at increasing India’s overall exports to $2 trillion by 2030, with equal contributions from the merchandise and services sectors.

FTP: An Overview

Foreign Trade Policy outlines the strategies, rules, and guidelines for India’s trade relations with the rest of the world. Under this policy, the government is required to formulate, implement and monitor trade policies under the Foreign Trade Development and Regulation Act, 1992, to support foreign trade and maintain a favourable balance of payments.

The previous policy was launched in 2015. It sought to boost India’s exports from $465 billion in 2013-14 to $900 billion by 2019-20. It introduced several schemes to encourage exports and was successful in achieving exports of goods and services worth $526.55 billion by the end of its initial term in 2019-20. However, export momentum was derailed in 2020-21 due to the pandemic and geopolitical tensions.

The New FTP: Objectives

The new FTP has set an ambitious target of increasing India’s overall exports to $2 trillion by 2030, with equal contributions from the merchandise and services sectors. The new policy aims to simplify the export process, reduce transaction costs, and introduce e-initiatives to ease business operations. Additionally, it aims to develop additional export hubs and enhance collaboration among exporters, states, districts, and Indian missions.

Key Pillars of the New FTP

The new FTP rests on four key pillars. Firstly, it aims to replace the incentive-based system of promoting exports with remission and entitlement-based regimes. Secondly, it aims to facilitate enhanced collaboration among exporters, states, districts, and Indian missions. Thirdly, it aims to reduce transaction costs and introduce e-initiatives for ease in business operations. Finally, it aims to develop additional export hubs to promote exports from all parts of the country.

The new policy also seeks to simplify the export process for items falling under the Special Chemicals, Organisms, Materials, Equipment, and Technologies (SCOMET) category. The use of the Indian currency in cross-border trade will also be encouraged, aided by a new payment settlement framework introduced by the Reserve Bank of India in July 2022.

Flexibility and Responsiveness

The new FTP is intended to be responsive to changing circumstances and will be modified as and when required. The government will consistently gather input from relevant stakeholders to enhance and revise the policy. This flexibility and responsiveness of the new FTP bode well for India’s export sector and reflect the government’s commitment to boosting exports and creating employment opportunities.

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