The Government recently announced the Foreign Trade Policy 2023 to boost the nation’s exports to $2 Trillion by 2030. As of now, India’s export sector is already approaching $760 Billion. Unlike the previous 5-year Foreign Trade Policy, the recently announced policy is open-ended and dynamic. According to Director General of Foreign Trade, Santosh Sarangi, the policy is open to revisions as required.
The new policy is based on 4 key pillars:
- Incentive Remission
- Export Promotion through Collaboration among Exporters, States, and Districts
- Reduction of Transaction Costs and E-initiatives
- Development of Export Hubs and streamlining SCOMET policy
Key Highlights as outlined by the Foreign Trade Policy 2023:
1. Process Re-engineering and Automation
As part of the ‘ease of doing business initiative, the new policy will see the Government adopting more technological solutions like better risk management systems to promote easier approval processes for MSMEs and others. Furthermore, schemes under FTP 2015-20, like Advanced Authorisations, EPCG, etc., will be continued after considerable process re-engineering and tech enablement.
2. Towns of Export Excellence
The new policy also saw the addition of 4 new towns (namely Faridabad, Mirzapur, Moradabad, and Varanasi) to the Towns of Export Excellence (TEE) program. The towns, including the 39 towns that were already part of the TEE program, will get priority access to funds under the MAI scheme and avail Common Service Provider (CSP) benefits for export fulfillment under the EPCG Scheme. The aim is to boost exports of handlooms, handicrafts, and carpets.
3. Recognition of Exporters
Exporters will be assigned ‘status’ based on their export performance and will be encouraged to provide trade-related training to build a bigger pool of manpower. Moreover, status recognition standards will be developed to enable more firms to achieve 4 and 5-star ratings, enabling better branding opportunities in the market.
4. Promoting Exports from Districts
The new policy focuses on nurturing partnerships with State governments and pushing ahead the Districts and Export Hubs (DEH) initiative to boost the development of exports at the grassroots level. Action plans with district-specific strategy will be prepared to promote export at the district level and up. Also, institutional mechanisms are to be set up at both State and District levels to identify exportable products and resolve concerns at the grassroots level.
5. Streamlining SCOMET Policy
Going forward there will be special emphasis on the SCOMET (Special Chemicals, Organisms, Materials, Equipment, and Technologies) policy, and will be made more robust to ensure compliance under the international treaties India has entered. The renewed system will give exporters access to dual-use high-end goods and technologies.
6. Facilitating E-commerce Exports
The new policy establishes the roadmap to achieve the e-commerce export potential of $300 Billion by 2030. The roadmap will outline elements such as payment reconciliation, bookkeeping, returns policy, and export entitlements. Additionally, the consignment-wise cap for E-commerce exports by courier has been raised to Rs 10 Lakh from the previous Rs 5 Lakhs.
7. Facilitation under Export Promotion of Capital Goods (EPCG)
The Foreign Trade Policy 2023 further rationalizes the import of capital goods without customs duty for the production of export items. More schemes like the PM MITRA scheme have been added to allow exporters to claim benefits under the CSP scheme. Now, Battery Electric Vehicles, Vertical Farming equipment, Wastewater Treatment and Recycling, Rainwater harvesting systems, and Green Hydrogen are added to Green Technology products and will be eligible for reduced Export Export Obligation requirements.
8. Facilitation under AAS
As part of the new policy, the Advance Authorisation Scheme (AAS) allows for the duty-free import of raw materials for the production of export items. AAS will now also extend to include the exports of the Apparel and Clothing sector.
9. Merchanting Trade
To develop India as a merchanting hub, now the Merchanting trade of restricted or prohibited goods will be possible under the export policy. However, such trade will have to be compliant with the RBI guidelines. Merchanting trade is the shipment of goods from one country to another without stopping at an Indian port, but involving an Indian intermediary.
10. Amnesty Scheme
Under FTP 2023, a one-time Amnesty Scheme, in line with the Vivaad se Vishwaas initiative, will be given to exporters to settle their tax disputes amicably. The Amnesty Scheme has been announced to give relief to exporters who were not able to fulfill their obligations under EPCG and Advance Authorizations. Moreover, the interest payable by the exporters has been capped at 100% of the exempted duties. It is meant to reduce the burden of high duty and interest costs that come with pending cases. With these reliefs, the Government aims to give defaulting exporters a chance to start afresh and be compliant with regulations.
In addition to the changes mentioned above, the new Foreign Trade Policy also aims to make the Indian Rupee the global currency by allowing for settlements for international trade in the currency.
As we mentioned at the beginning of the article, the new Foreign Trade Policy has been deliberately drafted to be dynamic and open-ended allowing it to be revised and adapted to the needs of the times. With this policy, the Government aims to boost the Indian Export Industry to become the center of Global Trade.
Saddam Hussain is a digital marketing and supply chain finance expert with over a decade's working experience. He specializes in areas such as invoice discounting, working capital management, cash flow forecasting, and risk mitigation and is passionate about sharing his knowledge and expertise with others. His writing is clear, concise, and accessible to both finance professionals and business owners. He believes supply chain finance is a crucial component of any successful business. His goal is to empower readers with the knowledge and tools they need to achieve these goals. When he's not writing or consulting, he enjoys traveling and trying new foods. You can reach him through LinkedIn or Twitter for a quick chat.