Foreign Trade Policy 2023: Objectives, Features & Impacts - UPSC Notes

The Foreign Trade Policy is a comprehensive framework evolved by the Government of India for regulation and promotion in international trade. It outlines policies, guidelines, and incentives for the exporter and the importer towards an improvement in the trade performance of the country. It enhances global competitiveness and achieves sustainable economic growth. The FTP encompasses various schemes, procedural norms, and institutional measures. These aid in promoting exports, facilitating the importation of necessary goods, and attracting foreign investment. Thus, it will ensure the protection of the country's economic interests.

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The Foreign Trade Policy falls under the UPSC General Studies Paper 3, which is on Economic Development and includes various aspects of the Indian economy, such as trade policies, liberalization, and investment strategies. Knowledge of FTP is essential for aspirants to understand the dynamics of India's trade policy. Join the UPSC coaching today and boost your preparation.

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What Is The Foreign Trade Policy 2023

Foreign Trade Policy (FTP) 2023 is an active policy of India that is efficient at increasing exports and making export processes easier. It changes the incentive-based support to the system of remission and entitlement, encourages the cooperation between exporters, states, and districts and pays attention to the issue of doing business via automation and digitalization. Emerging industries such as e-commerce, the growth of MSMEs, and the goal to grow India export to 2 trillion dollars by the year 2030 are also among the provisions deemed to be promoted by the policy.

Objectives of Foreign Trade Policy

The Foreign Trade Policy 2023 has several key objectives. These are aimed at promoting sustainable economic growth and enhancing India's position in the global market:

• Boosting merchandise exports: Export incentives, logistics and access to market.
• Export market diversification: Diversify away from traditional markets; the new markets must be sought to expand the base.
• Increase service exports: Enhance sectors of IT, health, education, and tourism services
• Improve competitive efficiency: Enhance infrastructures, reduce cost, and processes must be streamlined so that Indian goods can compete internationally.
• Make in India: It will further cement the domestic production and value addition for higher growth of exports
• Job Creation: Facilitate more jobs under the overall structure by strengthening export of MSME and startup products and services.
• Sustainable as well as Inclusive growth: Growth that will be environment friendly and people-centric.

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Key Highlights of the Foreign Trade Policy 2023

Process Re-Engineering and Automation 

• With the new FTP, more faith is being placed on exporters with automated IT systems and a risk management system for various approvals.
• The policy focuses on export promotion and development, taking it out of the incentive regime into a regime that facilitates, relying on technology interface and the principles of collaboration.
• FTP 2023 formalises ways of implementation within a paperless, online-based setting based on previous business ease measures.
• MSMEs and others will find it less complicated to access export benefits through reduced fee structures and IT-based schemes.
• The duty exemption schemes for export production will henceforth be introduced into regional offices under an IT system regime governed by rules without a manual interface.

Towns of Export Excellence

• 39 towns are already in existence as Towns of Export Excellence (TEE), but four new places have been constituted as new towns, i.e., Faridabad, Mirzapur, Moradabad and Varanasi.
• The TEEs shall enjoy the privilege of receiving first access to export promotion funds under the MAI scheme. They will be capable of accessing the benefits of Common Service Provider (CSP) facilities under the EPCG Scheme to fulfill their export.
• Market Access Initiative (MAI) Scheme is one of the central Export Promotion Schemes conceived to be used as a catalyst in primary export promotion by India on a sustained basis.
• The Export Promotion Capital Goods (EPCG) Scheme aims at importing capital goods, which will help in the production of quality goods and services and make India a competitive manufacturer.
• This will increase handlooms, handicrafts, and carpet exports.

Recognition of Exporters

• The ‘status exporter firms that are differentiated using export performance will henceforth participate in capacity building initiatives.
• Just like in the case of the each one teach one program, anyone with 2-star and above status would be requested to offer trade-related training to interested persons with the help of a model curriculum.
• This will assist India to create a qualified manpower reserve that can be used in servicing a five trillion economy by the year 2030.
• The norms of status recognition have been re-balanced so that more exporting firms can get 4 and 5-star ratings, which results in an improved branding opportunity in export markets.

Promoting Export from the Districts 

• The FTP is focused on association with State governments and execution of the Districts as Export Hubs (DEH) program to drive exports at district level.
• Export action plans to be drawn each on each district on how the district works to ensure that there is export in the district based on the identified products and services.

Streamlining SCOMET Policy

• India is focusing more on the export control regime as it becomes increasingly combined with the countries associated with export control regime.
• It has a broader recognition and awareness of SCOMET (Special Chemicals, Organisms, Materials, Equipment and Technologies), amongst stakeholders.

Facilitating E-Commerce Exports

• Exports of e-commerce is a promising category that has to be addressed by the specific policy interventions as offline trade.
• Other estimates contest that by 2030, India has a potential export earnings of between 200 and 300 billion dollars in the e-commerce exports.
• FTP 2023 presents the vision and plan on how to create hubs of e-commerce and other aspects.
• To begin with, the consignment-wise limit on E-Commerce on exports using courier has been increased to 10 Lakh on the FTP 2023 as compared to 5 Lakh before.
• Facilitation under Export Promotion of Capital Goods (EPCG) Scheme-
• Further rationalization of the EPCG Scheme whereby import of capital goods with payment of zero Custom duty is made available to the export-oriented production.

Facilitation under the Advance Authorization Scheme 

• Availability of duty-free tariff of raw materials with which to manufacture export items is obtained by the Advance Authorization Scheme, which can be accessed by the Domestic Tariff Area (DTA) units.
• In, the FTP 2023, some of the facilitation provisions have been incorporated based on the feedback of the interaction with the industry and Export Promotion councils.

Amnesty Scheme

• Lastly, the Government is firm in decreasing litigation and establishing relationship based on trust in order to overcome the problems exporters have to endure.
• The government is bringing a special one-time Amnesty Scheme under the FTP 2023 to clear default in Export Obligation in line with the initiative introduced as part of the “Vivaad se Vishwaas” initiative to amicably resolve tax disputes.
• This plan is to integrate exporters who have failed to fulfill their requirements under EPCG and Advance Authorizations in order to have a relief.

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Impact of the New Foreign Trade Policy 2023 on Exports

The new policy would have manifold effects on the export landscape of India. A few of those are:

• Increased competitiveness: Indian products, through the schemes of refunding embedded taxes, such as RoDTEP, become more internationally competitive.
• Higher export volumes: With incentives and easier procedures, it would lead to an overall increase in export volumes, leading to greater foreign exchange earnings.
• Market Diversification: It is likely to reduce the reliance on the conventional markets and penetration of new markets in order to reduce the risk and open up new revenue streams.
• Sectoral Growth: This will throw all rounded growth in various segments of the economy like agriculture, manufacturing, IT, and services sectors.

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How will FTP 2023 impact India's goal of $2 trillion exports by 2030?

The Foreign Trade Policy (FTP) 2023 would have a major welfare effects in helping India achieve its objective of reaching 2 trillion by 2030 through various key effects as follows:

• Shift from Incentives to Remission and Entitlement: FTP 2023 moves from traditional export incentives to a tax remission and entitlement-based regime. This reduces export costs and enhances exporters’ competitiveness globally, aiding in reaching the export target.
• Dynamic, Ongoing Policy: Unlike previous policies with fixed durations, FTP 2023 has no end date and will be updated continuously. This flexibility allows it to adapt quickly to changing international trade conditions and emerging opportunities, maintaining export growth momentum.
• Collaboration and Export Ecosystem Development: The policy emphasizes partnership among exporters, states, districts, and Indian missions abroad. It introduces initiatives like "Towns of Export Excellence" including new designated towns to boost regional export hubs.
• Promotion of Emerging Sectors: FTP 2023 supports growth areas like e-commerce exports—which could be worth $200-300 billion by 2030—and green technologies, thus broadening export portfolios and opportunities.
• Ease of Doing Business and Digitization: Streamlining procedures with automation and digital approvals reduces transaction costs, particularly benefiting Micro, Small and Medium Enterprises (MSMEs), increasing their export participation.
• Internationalization of Trade in Indian Rupee: FTP includes provisions for settling international trade in Indian Rupees, aiming to strengthen the currency's global acceptance and reduce foreign exchange-related barriers.
• Focused Government Outreach: There is an emphasis on global outreach and active promotion with Indian missions, aimed at expanding India’s global market share.

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Old Foreign Trade Policy 2015-20

The Foreign Trade Policy 2015-20 looked upon the agenda for transforming India as an emerging and important player in world trade. This shall overcome many barriers of trade and develop improved export performance. It is described under the following headings:

• Merchandise Exports from India Scheme (MEIS): This scheme was brought in to negate the infrastructural inefficiencies and cost incurred while exporting the goods.
• Services Exports from India Scheme (SEIS): This scheme aimed to encourage the export of services. The scheme offered duty credit scrips to eligible service providers.
• Niryat Bandhu Scheme: This scheme was developed for mentoring first-time exporters to be full-fledged exporters through every phase of export.
• Trade Facilitation and E-governance: It encompasses reducing transaction costs and time through IT-enabled platforms and services.

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