Mains Practice Questions

Approach

• Start your answer by briefly explaining the Foreign Trade Policy.
• Discuss its key features and impacts on the country's international trade and economic growth.
• Conclude accordingly.

Introduction

Foreign Trade Policy (2023) is a policy document which is based on continuity of time-tested schemes facilitating exports as well as a document which is nimble and responsive to the requirements of trade.

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.

Body

Key Features of the Policy

• Export Target:
  • The USD2 trillion target for exports set for 2030 endorsed by FTP 2023 comprises USD1 trillion of goods exports and USD1 trillion of services exports.
• Process Re-Engineering and Automation:
  • The policy emphasizes export promotion and development, moving away from an incentive regime to a regime which is facilitating, based on technology interface and principles of collaboration.
• Recognition of Exporters:
  • Firms that have been acknowledged for their export performance with ratings such as 2-star, 4-star, or 5-star will now be involved in training and developing skills, akin to the 'each one teach one' initiative.
• Promoting Export from the Districts:
  • It seeks to establish collaborations with state governments and advance the Export Hubs (DEH) initiative at the district level to boost exports and expedite the growth of the local trade ecosystem.
• Streamlining SCOMET Policy:
  • India is giving greater importance to its "export control" system in order to adhere to the international treaties and agreements it has entered into.
    • SCOMET items, which stand for "Special Chemicals, Organisms, Materials, Equipment and Technologies," have the potential for both civilian use and as weapons of mass destruction, and therefore, are considered dual-use items.
• Facilitating E-Commerce Exports:
  • It outlines a plan and strategy for creating e-commerce hubs and associated components, such as payment settlement, record-keeping, return policies, and export privileges.
• Facilitation under (EPCG) Scheme:
  • The EPCG Scheme, which permits duty-free import of capital goods for export production, is undergoing further streamlining.
    • Furthermore, new schemes such as PM MITRA have been included to avail benefits under the Common Service Provider program.
• Facilitation under Advance authorization Scheme:
  • The Advance Authorization Scheme (AAS) enables duty-free import of raw materials for producing export goods.
    • Recently, it has also been extended to cover exports from the Apparel and Clothing industry.
• Amnesty Scheme:
  • The government has launched a unique one-time Amnesty Scheme that resembles the "Vivaad se Vishwaas" initiative. This scheme allows Exporters who have failed to fulfill their commitments under EPCG and Advance Authorizations to regularize their status by paying all customs duties exempted in proportion to their unfulfilled export obligations.

Impacts of the Policy on the International Trade and Economic Growth

• Increase Exports:
  • With the simplification of export procedures and expansion of export credit, exporters are expected to be able to increase their production and export volumes, which could help boost India's overall exports.
  • Additionally, the promotion of high-value exports could help increase the value of exports, which could positively impact India's balance of trade.
• Increase Foreign Exchange:
  • The policy could also have a positive impact on India's economic growth. An increase in exports could lead to increased foreign exchange earnings, which could help improve India's foreign reserves.
• Create Employment Opportunities:
  • An increase in exports could create employment opportunities and help boost domestic manufacturing, which could contribute to the growth of the Indian economy.

Conclusion

The Foreign Trade Policy 2023 by India has the potential to positively impact India's international trade and economic growth by boosting exports and promoting domestic manufacturing. However, effective implementation and monitoring of the policy will be crucial to achieving these outcomes. There may also be challenges in terms of global economic conditions and competition from other exporting countries. Therefore, the government may need to continuously evaluate and update the policy to ensure its effectiveness.