INTRODUCTION
The Export-Import Policy, or simply an EXIM Policy, is a set of guidelines and instructions related to the import and export of goods. The Government of India notifies the EXIM Policy for five years under Section 5 of the Foreign Trade (Development and Regulation Act), 1992. The current policy covers the period 2015-2020. The Export-Import Policy is updated every year on the 31st of March, and the modifications, improvements and new schemes become effective from the 1st of April of every year. All types of changes or modifications related to the EXIM Policy usually is announced by the Union Minister of Commerce and Industry, who coordinates with the Ministry of Finance, the Directorate General of Foreign Trade and its network of regional offices.
The primary objective of this paper is to conduct a comprehensive and critical analysis of the latest EXIM Policy i.e. Foreign Trade Policy 2023, shedding light on its various features, objectives, and noteworthy highlights. This analysis aims to provide a thorough understanding of how this policy shapes India's economic landscape, both domestically and internationally.
BACKGROUND OF EXIM POLICY
The EXIM Policy of India contains several policy measures and related decisions taken by the central government regarding imports and exports to/from the country. In addition, it also describes the various export promotion measures, policies and procedures related thereto. The Foreign Trade Policy is prepared and announced by the Central Government (Ministry of Commerce) of India. India's Export-Import Policy, also known as Foreign Trade Policy, in general, aims at developing export potential, improving export performance, encouraging foreign trade and creating a favourable balance of payments position. Whilst the trade policies during the 1950s and 1960s were designed to emphasize self-reliance and self-sufficiency of the country, the policies during (and post) 1970s were driven by the objectives of export-led growth and increased efficiency and competitiveness. In the year 1962, the Government of India appointed a special EXIM Committee to review the previous export-import policies of the Government. Later, Mr. V.P. Singh, the then Commerce Minister, announced the EXIM Policy on the 12th of April, 1985. Initially, the EXIM Policy was introduced for three years with the main objective of boosting the export business in India. The trade policy, however, during this period was of a restrictive sort. In this context, the year 1991 is considered a ‘watershed’ as far as the trade sector of the country is concerned. It was during this year that the country evidenced massive trade liberalization measures and departed from the prevalent protectionist trade policies. The period after the year 1991 is therefore considered the post-reform period, and the significant EXIM policies of India since 1992 are:
• EXIM Policy 1992 -1997
• EXIM Policy 1997 -2002
• EXIM Policy 2002 -2007
• EXIM Policy 2004 -2009
• EXIM Policy 2009 -2010
• EXIM Policy 2011-2014
• EXIM Policy 2015-2020
AIMS OF THE NEW FOREIGN TRADE POLICY 2023
The Key Approach to the policy is based on these 4 pillars:
(i) Incentive to Remission,
(ii) Export promotion through collaboration - Exporters, States, Districts, Indian Missions,
(iii) Ease of doing business, reduction in transaction cost and e-initiatives and
(iv) Emerging Areas – E-Commerce Developing Districts as Export Hubs and streamlining SCOMET policy.
Foreign Trade Policy (2023) is a policy document that is based on the continuity of time-tested schemes facilitating exports, as well as a document that is nimble and responsive to the requirements of trade. It is based on principles of ‘trust’ and ‘partnership’ with exporters. In the FTP 2015-20, changes were done after the initial release, even without announcing a new FTP responding dynamically to emerging situations. Hereafter, the revisions of the FTP shall be done as and when required. Incorporating feedback from Trade and Industry would also be continuous to streamline processes and update FTP occasionally.
The FTP 2023 aims at process re-engineering and automation to facilitate ease of doing business for exporters. It also focuses on emerging areas like dual-use high-end technology items under SCOMET, facilitating e-commerce export, and collaborating with States and Districts for export promotion. The new FTP is introducing a one-time Amnesty Scheme for exporters to close the old pending authorizations and start afresh. The FTP 2023 encourages recognition of new towns through the “Towns of Export Excellence Scheme” and exporters through the “Status Holder Scheme”. The FTP 2023 facilitates exports by streamlining the popular Advance Authorization and EPCG schemes and enabling merchanting trade from India.
CURRENT FTP 2023 PROPOSALS
India's new Foreign Trade Policy (FTP) for 2023 holds significant promise for the nation's economic trajectory. Spearheaded by a shift from an incentive-based approach to a technology-driven facilitation paradigm, this policy seeks to propel India's export sector into a new era of efficiency and competitiveness. One of the pivotal pillars of this policy is the reengineering and automation of export processes. Embracing cutting-edge information technology systems and risk management mechanisms, the FTP 2023 establishes a streamlined and paperless framework for export approvals and benefits. This strategic move is poised to empower both established exporters and burgeoning Micro, Small, and Medium Enterprises (MSMEs) by reducing administrative barriers and enhancing accessibility to export incentives.
The policy's spotlight on Towns of Export Excellence (TEE) casts a transformative glow on export hubs. Beyond the existing 39 towns, four additional towns – Faridabad, Mirzapur, Moradabad, and Varanasi – have now earned the TEE designation. These towns will be granted priority access to export promotion funds and the benefits of the Common Service Provider (CSP) scheme under the Export Promotion Capital Goods (EPCG) framework. This targeted expansion aims to amplify handloom, handicraft, and carpet exports, reinvigorating local economies. Acknowledging the vital role of exporters, the FTP 2023 forges a new partnership between recognized exporters and capacity-building endeavours. This mutually beneficial collaboration envisions exporters with a 2-star and higher status actively participating in training initiatives. By imparting trade-related education to interested individuals, these exporters contribute to a skilled workforce capable of steering India towards its ambitious $5 trillion economy goal by 2030. Moreover, the recalibrated status recognition criteria foster increased branding opportunities in global markets, enhancing India's export competitiveness.
With an emphasis on promoting exports at the grassroots level, the policy endeavours to establish Districts as Export Hubs (DEH). Collaborating closely with state governments, this initiative seeks to propel district-specific products and services onto the global stage. This endeavour is facilitated through the State Export Promotion Committee and District Export Promotion Committee, acting as institutional mechanisms to identify export-worthy goods and address local concerns. By nurturing localized export strategies, this approach taps into the latent export potential across India's diverse regions.
On the international front, the policy underscores the significance of an adept export control regime. Strengthening India's integration with export control regime countries, the policy bolsters the Special Chemicals, Organisms, Materials, Equipment, and Technologies (SCOMET) framework. This initiative would improve India's ability to engage in dual-use high-end goods and technology exchange while ensuring responsible exports under the SCOMET regime. In recognizing the huge potential of e-commerce exports, the FTP 2023 carves a distinct path for this dynamic sector. Anticipating a remarkable export potential ranging from $200 to $300 billion by 2030, the policy outlines an elaborate roadmap for establishing e-commerce hubs and related infrastructure. By facilitating higher-value exports through relaxed consignment limits, integrating postal and courier exports with the ICEGATE platform, and proposing an encompassing e-commerce policy, India aims to harness the huge e-commerce landscape for export growth.
Facilitating the export of capital goods through the EPCG scheme, the FTP 2023 introduces several amendments to develop this crucial sector. Notably, the Prime Minister Mega Integrated Textile Region and Apparel Parks (PM MITRA) scheme becomes eligible for benefits under the CSP scheme, while sectors like dairy and green technology are accorded preferential treatment. This calibrated approach aligns export incentives with India's evolving economic priorities. Another significant facet is the Advance Authorization Scheme, enabling duty-free imports of raw materials for manufacturing export items. This scheme, akin to Export Oriented Units (EOUs) and Special Economic Zones (SEZs), introduces facilitation provisions for the apparel and clothing sector. Moreover, the policy extends the Self-Ratification Scheme's benefits to exporters with a 2-star and higher status, facilitating smoother processes for authorized economic operators.
With the aspiration of transforming India into a merchanting trade hub, the FTP 2023 introduces provisions for merchanting trade. This unique approach permits the trade of restricted and prohibited items under certain conditions, encouraging the shipment of goods from one foreign country to another via Indian intermediaries. While adhering to RBI guidelines, this move positions India to capitalize on merchanting trade opportunities similar to global trade hubs like Dubai, Singapore, and Hong Kong. In a final stride towards bolstering export sector resilience, the FTP 2023 ushers in an Amnesty Scheme. Drawing inspiration from the “Vivaad se Vishwaas” initiative, this one-time amnesty endeavour seeks to resolve default on Export Obligations. By providing relief to exporters burdened by duty and interest costs associated with pending cases, this amnesty lays the foundation for trust-based relationships and streamlined trade processes.
STAKEHOLDER AND POLICY ANALYSIS
The FTP emphasises trade facilitation through technology and digitisation, promotes e-commerce, and aims to facilitate exports through various schemes and measures. While the FTP generally reflects India’s ambition to become an export hub and increase its share in global value chains, the FTP’s emphasis on e-commerce and ‘Local goes Global’ also highlights the inclusive approach of the current policy. The new FTP is a shift from an incentive-based approach and creates an enabling ecosystem for exporters, which is a move in line with India’s vision of becoming “Atmanirbhar” (self-reliant).
The new section on ‘Promoting Cross Border Trade in Digital Economy’ boosts e-commerce exports. It does so through various measures, including extending all FTP benefits to e-commerce exports, increasing the value limit for exports through couriers to INR1,000,000 per consignment, promoting e-commerce through postal routes, and handholding and outreach schemes to promote e-commerce exports. India’s e-commerce market is one of the largest markets in the world and is expected to grow further in the coming years. This results from a combination of factors, including increased internet and smartphone penetration and simplified payment systems. E-commerce exports, however, still account for only a fraction of India’s total goods exports. The FTP 2023 looks to change this and increase India’s e-commerce exports by enabling vendors to access the international markets.
The policy proposes to create E-Commerce Export Hubs (ECEHs), which would act as a centre for favourable business infrastructure and facilities for cross-border e-commerce activities. These hubs would provide the necessary infrastructure for exports and also connect to and leverage the services of the nearest logistics hubs. To access these facilities and benefit from these initiatives, the government aims to increase awareness by conducting outreach activities and taking measures for skill development and capacity building in partnership with other government authorities and knowledge partners. Most notably, the FTP also aims to promote e-commerce through postal routes. It aims to operationalise ‘Dak Niryat Kendras’ to “work in a hub-and-spoke model with Foreign Post Offices (FPOs) to facilitate cross-border e-commerce and to enable artisans, weavers, craftsmen, MSMEs in the hinterland and land-locked regions to reach international markets”. This model will allow vendors to export from areas that would be generally excluded in the logistics chains.
The policy proposes to create E-Commerce Export Hubs (ECEHs), which would act as a centre for favourable business infrastructure and facilities for cross-border e-commerce activities. E-commerce platforms for export can serve as a democratised marketplace that allows small vendors, MSMEs, and local artisans to access international markets and retain higher profit margins. The FTP 2023 approaches digitally-enabled cross-border trade in an inclusive manner and seeks to make small players part of India’s exports. Second, in the spirit of ‘Local goes Global’ and ‘Vocal for Local’, the section on ‘Developing Districts as Export Hubs’ aims to “galvanise districts of the country to become export hubs by identifying products and services with export potential in the district”. It proposes to do so by creating District Export Promotion Committees (DEPCs) and creating District Export Action Plans for each district, which can be monitored online.
Identifying the export of products/services at the district level and conducting outreach activities, including buyer-seller meets, trade fairs, and workshops, can onboard a more significant number of exporters. The process of identifying and prioritising two to three high-potential products/services from the districts can also increase competition and innovation. These interventions at the district level can generate awareness and help small vendors to access more significant markets. While some districts in India are already known for their exports, the new measures will widen the scope of outreach and potentially onboard previously excluded exporters.
Lastly, the FTP has declared four new ‘Towns of Export Excellence’ (TEE), intending to move up the value chain and tap into new markets. These four new TEEs are in addition to the already existing 39 towns of export excellence.”
The new towns are:
CONCLUSION
“The EXIM Policy i.e. Foreign Trade Policy 2023, aims to increase India’s overall exports to USD 2 trillion by 2030, with equal contributions from the merchandise and services sectors. And also to encourage the use of the Indian currency in cross-border trade, aided by a new payment settlement framework introduced by the RBI in July 2022. This could be particularly advantageous in the case of countries with which India enjoys a trade surplus.
Overall, the FTP’s goal to make India a reliable and trusted trading partner, with the vision of increasing the country’s share in the global supply chain in exports, is propelled by government schemes for more significant exports and positive interventions for small-scale vendors and businesses. By including and empowering local vendors, the FTP seeks to make every seller a part of India’s export story.”
REFERENCES
- An Analytical Study of EXIM Policies of India since Independence, https://www.irjweb.com/An%20Analytical%20study%20of%20EXIM%20Policies%20of%20India%20since%20Independence%20A%20Focus%20on%20Ayurveda.pdf (last visited Aug 28, 2023).
- India Exim Policy - Foreign Trade Policy., https://www.exim-policy.com/ (last visited Aug 28, 2023).
- Foreign Trade Policy 2023 announced, https://pib.gov.in/pib.gov.in/Pressreleaseshare.aspx?PRID=1912572 (last visited Aug 28, 2023).
- Urvi Tembey, Inclusive India: The Foreign Trade Policy 2023, ORF, https://www.orfonline.org/expert-speak/inclusive-india-the-foreign-trade-policy-2023/ (last visited Aug 28, 2023).
- Saloni Singhal, Export Import Policy, Objectives, Impact on Indian Economy & More, OLIVEBOARD (Jun. 20, 2023), https://www.oliveboard.in/blog/export-import-policy/ (last visited Aug 28, 2023).