- Recently, the Union Minister of Commerce and Industry, Consumer Affairs, Food and Public Distribution and Textiles has launched the Foreign Trade Policy 2023.
- The New policy has replaced the old policy that had been in place since 2015, the new policy kicks in from 2023-24 and aims to almost triple India’s goods and services exports to $2 trillion by 2030, from an estimated $760 billion in 2022-23.
- The Old Policy enabled the growth of exports by 75% from $435 billion in 2015-16 to $760 billion in 2022-23.
- India’s global share in merchandise exports and services exports is very low and the government aims to grow it to the range of 7% to 10%.
- The new policy will have no sunset date (ending date) and will be tweaked based on the emerging world trade scenario and industry feedback. While the policy will be open-ended, the schemes sanctioned under it will be time bound.
- There are no major new schemes, barring a one-time amnesty under the existing Advance Authorisation and Export Promotion Capital Goods (EPCG) schemes, that allow imports of capital goods subject to specified export obligations.
- The Policy had opened up up a new area of potential exports called “merchanting trade”
- Merchanting trade refers to shipment of goods from one foreign country to another foreign country without touching Indian ports, involving an Indian intermediary. This will also enable exports of restricted goods
- Four towns in Uttar Pradesh — Faridabad, Moradabad, Mirzapur and Varanasi — were announced as centres of export excellence for their performance in the apparel, handicrafts, handmade carpets and handlooms, respectively.
- The policy also plans to launch a special advance authorisation scheme for the clothing and apparel sector so that they can react to market demands and fashion trends faster.
- It is also looking to lower qualification thresholds for star ratings which recognise exporters based on export performance.
- Low credit access: Indian exporters have very low access to trade finance and export credit. This is especially true for Micro, Small, and Medium Enterprises (MSMEs), even though they account for close to half of India’s total exports.
- The financial support Indian exporters receive is far less than in other countries. export credit agencies doled out $7.6 billion in funds in India while the figure for China stood at $39.1 billion.
- Bureaucracy: The export process in India is more time-consuming than in many other countries due to a high documentation requirement. Indian exporters must prepare a large set of documents for each stage of the shipping process.
- It is also important to plan ahead because certification authorities at Indian ports are not available round the clock or on all days of the week.
- Inadequate infrastructure: Infrastructure is India’s weakest link. In data firm Statista’s ranking of 100 countries based on the quality of their infrastructure in 2019, India’s score was 68.1. To put this in perspective, top-ranked Singapore scored 95.4 while bottom-ranked Bolivia was 10-odd points behind India, at 57.1. .
Initiatives for Improving Exports
- Remission of Duties or Taxes on Export Product (RoDTEP): It is a fully automated route for Input Tax Credit (ITC) in the GST (Goods and Service Tax) to help increase exports in India.
- ITC is provided to set off tax paid on the purchase of raw materials, consumables, goods or services that were used in the manufacturing of goods or services. This helps in avoiding double taxation and the cascading effect of taxes.
- Rebate of State and Central Taxes and Levies: The scheme was offered for embedded state and central duties and taxes that are not refunded through Goods and Services Tax (GST).
- It was available only for garments.It was introduced by the Ministry of Textiles.
- Merchandise Exports from India Scheme: MEIS was introduced in the Foreign Trade Policy (FTP) 2015-20, under MEIS, the government provides duty benefits depending on product and country.
- Rewards under the scheme are payable as percentage of realised free-on-board value (of 2%, 3% and 5%) and MEIS duty credit scrip can be transferred or used for payment of a number of duties including the basic customs duty.
- Common Digital Platform for Certificate of Origin has been launched to facilitate trade and increase Free Trade Agreement (FTA) utilisation by exporters..