India’s New Foreign Trade Policy: Policy Updates

India’s Foreign Trade Policy has a clear aim to boost exports. It also pushes the envelope to integrate the country into global supply chains. Prioritizing ease of doing business via technology and digitization to create a favourable environment for small to large-scale Indian businesses. The goal of the new policy is to make trade easier and reduce both the cost and time involved. Aligning local and global practices as those set in WTO and free trade agreements. Helping businesses to become more competitive in the global market.

Piyush Goyal, India’s Commerce and Industry Minister presented the new foreign trade policy with an ambitious goal to achieve $2 trillion in exports by 2030. Setting out a blueprint for India as a global trade market and export-oriented economy. This policy has the needs of the SME sector in mind and also improves India’s foreign trade for the e-commerce sector.

Essential pillars of the policy

1. Incentive to remission

This pillar has a clear agenda to shift the prior incentive-based approach to a remission and entitlement-based approach. Introducing Amnesty Scheme which is a one-time offer to help businesses who have not met the prior export obligation. It aims to reduce the fee amount businesses have to pay in interest for not meeting previous obligations. Giving many exporters a fresh start.

The new trade policy offers organizations that export textile and apparel, dairy, and a wider range of green technology to be eligible for benefits under outlined conditions.

2. Export promotion through collaboration

The new policy has various measures to encourage a more collaborative relationship between stakeholders. For instance, the new policy encourages training. Organizations that have a successful track record in exporting will be invited to partake in training initiatives to help other small and medium-scale organizations improve their exporting capabilities.

The policy also aims to strengthen government support for exporters in India at the district level. By setting up committees to scout, identify, and support local products and services that can be explored.

In this policy, four towns have been designated as Town of Export Excellence ( TEE). Giving them special benefits like access to government funding etc. These are Faridabad, Mirzapur, Moradabad, and Varanasi.

3. Ease of doing business

The policy aims to make it easier for businesses to engage in trade through digitalization. It brings in automation through IT systems in export approval processes and duty exemption schemes. Businesses can apply online for all Directorate General of Foreign Trade (DGFT) schemes, centralizing the DGFT helpdesk services. Offering faster processing and lower costs than the previous manual approach.

Another way of offering ease is by the introduction of a provision for merchanting trade. Which is shipping certain goods from one foreign country to another via an Indian intermediary, without the goods touching the Indian port. The policy has broadened the range of items allowed for merchanting trade.

4. Emerging areas

The policy highlights new areas where the government sees opportunities. E-commerce is a promising category that needs special policy intervention in export. The new policy outlines a clear vision and plan for the creation of e-commerce hubs, building related infrastructure, and providing services such as payment reconciliation, bookkeeping, returns policy, etc.

The new policy will aim to train and plan outreach activities to help businesses join e-commerce platforms and boost their international sales. Integrating Courier and Postal exports with ICEGATE to enable exporters to take advantage of its benefits under FTP.

The new intervention to enhance the SCOMET policy, which regulates the export of special chemicals, organisms, materials, equipment, and technologies, will help to ensure that Indian exporter’s products better align with global standards.

What are the Benefits for Indian Exporters in this Policy?

Here are some key benefits for Indian exporters with the new Foreign Trade Policy that fall under the Duty exemption, remission, and general schemes:

Duty Exemption:

1. EPCG Scheme

This scheme allows Indian exporters to import capital goods without paying for import duties. Provided that the capital goods imported are used for export production.

2. Advance Authorization Scheme

Another benefit for the Indian exporters is to import without paying import duties, provided that the finished goods are exported within a specified time. The aim is to improve the cash flow status of exporters and reduce their working capital needs.

3. The Duty-free Import Authorisation (DFIA) scheme

This scheme also focuses on the import of capital goods business needs in the production of new products. Including heavy machinery and equipment. Under this scheme, Indian exporters will be exempt from paying basic customs duties for importing such capital goods.

Duty Remission:

1. Duty drawback

The exporter can claim a refund of the import duties paid for the materials used in the production of exported goods. Helping Indian businesses to reduce the cost of production and become more competitive.

2. The Duty Entitlement Passbook Scheme (DEPB)

Under this, some export duties will be paid back to the business as credit. Encouraging the Indian exporters in certain specified areas of export.

Others:

3. Town of Export Excellence Scheme (TEE)

Under this scheme, Indian exporters can gain financial and technical assistance to smaller towns to develop their export potential. Boosting job creation and economic growth in the TEE.

4. E-single Window

The new online platform will offer a single point of contact for Indian exporters to file all required documents for exporting goods. Helping them to save cost, time, and effort.

As the new policy framework moves away from a subsidy-based regime, government critical support in automation, IT, trade facilitation, and transaction cost reduction will be significant. A reflection of this can see in how the government is highlighting emerging areas like e-commerce trade and promoting a digital platform for all processes.

The new Foreign Trade Policy is comprehensive, offering ambitious plans to boost the Indian export sector. It offers significant potential to increase India’s trade surplus while boosting economic development and creating new employment opportunities.

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Author: Mankiran

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