Foreign Trade Policy 2023 [UPSC Notes]

The Minister of Commerce & Industry, Consumer Affairs & Food & Public Distribution and Textiles,
Government of India has recently unveiled the new Foreign Trade Policy (FTP), 2023. In this article,
you can read all the important features of the Foreign Trade Policy, 2023 and how it will impact the
Indian economy. This topic is relevant for the IAS exam Indian economy segment.

Foreign Trade Policy 2023 Objectives

The objectives of the 2023 Foreign Trade Policy (FTP) are as under.

• To integrate India with the global markets: As India is on the path to becoming a developed
nation by 2047, the policy lays down a blueprint to integrate India with the global markets and
make it a reliable and trusted trade partner.
• To build a future-ready India: To build a future-ready India and to fulfil India's strategic vision
of making India one of the top exporting nations in the ‘Amrit Kaal’.
• To create an enabling ecosystem: The approach of this FTP is to gradually move away from an
incentive-based regime and create an enabling ecosystem to support the philosophy of ‘Atma
Nirbhar Bharat’ and ‘Local goes Global’.
• To collaborate with state governments: To build and encourage export promotion at the
district level.
• To triple India’s goods and services exports: The new policy will replace the existing policy
that had been in place since 2015. The new policy aims to almost triple India’s goods and
services exports to $2 trillion by 2030, from an estimated $760 billion in 2022-23.

About Old Foreign Trade Policy 2015-20:

• It provided a framework for increasing exports of goods and services as well as generation of
employment and increasing value addition in the country, in keeping with the “Make in India”
vision.
• It merged various schemes into a single Merchandise Export from India Scheme (MEIS) and
simplified the nomenclature of Export Houses.
• The policy also introduced incentives for Special Economic Zones and recognized successful
business leaders as Status Holders.
• A new chapter on Quality Complaints and Trade Disputes was incorporated to resolve trade
disputes between exporters and importers.
• The mid-term review of the policy increased the scope of MEIS and SEIS and extended the
validity of Duty Credit Scrips.

Legal Framework for FTP in India

 • Legal Basis of Foreign Trade Policy: The Foreign Trade Policy (FTP) 2023 is notified by the
Central Government, in the exercise of powers conferred under Section 5 of the Foreign Trade
(Development & Regulation) Act, 1992.
• Duration of FTP: The Foreign Trade Policy (FTP) 2023 incorporating provisions relating to the
export and import of goods and services, shall come into force with effect from 1st April 2023
and shall continue to be in operation unless otherwise specified or amended.
• Amendment to FTP: Central Government, in the exercise of powers conferred by Section 3 and
Section 5 of FT (D&R) Act, 1992, as amended from time to time, reserves the right to make any
amendment to the FTP, by means of notification, in the public interest.

Foreign Trade Policy 2023 Highlights

Trade Facilitation and Ease of Doing Business

• National Committee on Trade Facilitation (NCTF): India has ratified the World Trade
Organization’s Trade Facilitation Agreement (TFA) in April 2016. To facilitate coordination and
implementation of the TFA provisions, an inter-ministerial body i.e. the National Committee on
Trade Facilitation (NCTF) has been constituted.
• DGFT as a facilitator of exports/imports: DGFT has the commitment to function as a
facilitator of exports and imports. The focus is on good governance, which depends on efficient,
transparent and accountable delivery systems.
• Export of perishable agricultural products: To reduce transaction and handling costs, a single
window system to facilitate the export of perishable agricultural produce is being facilitated
through the Agricultural and Processed Food Products Export Development Authority
(APEDA).
• Niryat Bandhu: As a hand-holding scheme for new export/import entrepreneurs, DGFT is
implementing the Niryat Bandhu Scheme for mentoring new and potential exporters on the
intricacies of foreign trade.
• Online facility for e-Certificate of Origin (e-CoO): DGFT has created a common digital
platform for the issue of Preferential and Non-Preferential Certificate of Origin (e-CoO) by
designated agencies.

General Provisions regarding Imports and Exports

• Authority to specify procedures: DGFT

• Importer-Exporter Code (IEC): An IEC is a 10-character alpha-numeric number allotted to an
entity (firm/company/LLP, etc.) and is mandatory for undertaking any export/import activities.

Developing districts as export hubs

 • The FTP aims at building partnerships with State governments and taking forward the Districts
as Export Hubs (DEH) initiative to promote exports at the district level and accelerate the
development of a grassroots trade ecosystem.

Duty Exemption/Remission Schemes

• Duty Exemption Schemes. The Duty Exemption schemes consist of the following: Advance
Authorisation (AA) (which will include Advance Authorisation for Annual Requirement) & the
Duty-Free Import Authorisation (DFIA).
• Duty Remission Scheme. Duty Drawback (DBK) Scheme, administered by the Department of
Revenue.
• Scheme for Rebate on State and Central Taxes and Levies (RoSCTL), as notified by the
Ministry of Textiles.
• Schemes for Remission of Duties and Taxes on Exported Products (RoDTEP), notified by the
Department of Commerce and administered by the Department of Revenue.
• Duty-Free Import Authorisation Scheme (DFIA):
o Duty-Free Import Authorisation is issued to allow duty-free import of inputs. In addition,
the import of oil and catalyst which is consumed/utilised in the process of production of
export products may also be allowed.
o Import of Tyres under the DFIA scheme is not allowed.

Export Promotion Capital Goods Scheme (EPCG)

• Facilitation under the Export Promotion of Capital Goods (EPCG) Scheme:

o The EPCG Scheme, which allows the import of capital goods at zero customs duty for
export production, is being further rationalised. Some key changes being added are:
▪ The PM MITRA scheme has been added as an additional scheme eligible to
claim benefits under the CSP (Common Service Provider) Scheme of the Export
Promotion Capital Goods Scheme (EPCG).
▪ Battery Electric Vehicles (BEV) of all types, Vertical Farming equipment,
Wastewater Treatment and Recycling, Rainwater harvesting system and
Rainwater Filters, and Green Hydrogen are added to Green Technology products
– will now be eligible for reduced Export Obligation requirement under EPCG
Scheme.
• Amnesty Scheme:
o Amnesty Scheme under the FTP 2023 to address default on Export Obligations.
o This will provide relief to exporters who have been unable to meet their obligations under
EPCG and Advance Authorizations, and who are burdened by high duty and interest
costs associated with pending cases.
Export Oriented Units (EOUS), Electronics Hardware Technology Parks (EHTPS), Software
Technology Parks (STPS) And Bio-Technology Parks (BTPS):

• Units undertaking to export their entire production of goods and services (except permissible
sales in DTA), may be set up under the Export Oriented Unit (EOU) Scheme, Electronics
Hardware Technology Park (EHTP) Scheme, Software Technology Park(STP) Scheme or Bio-
Technology Park (BTP) Scheme for manufacture of goods.
• The objectives of these schemes are to promote exports, enhance foreign exchange earnings,
attract investment for export production and employment generation.
• Facilitation under Advance Authorization Scheme:
o Advance Authorisation Scheme accessed by DTA (Domestic tariff area) units provides
duty-free import of raw materials for manufacturing export items and is placed at a
similar footing to EOU and SEZ Scheme.

Quality Complaints and Trade Disputes

• Complaints/Disputes between two or more Indian entities are not covered under this mechanism.
Similarly, complaints/disputes between two or more foreign entities are also not covered.
• Mechanism for handling Complaints/Disputes:
o Committee on Quality Complaints and Trade Disputes (CQCTD): It will be
constituted in the Regional Authorities (RAs) of DGFT.
o Composition of the CQCTD: The CQCTD would be constituted under the
Chairpersonship of the Head of Office.
o Functions of CQCTD: The Committee (CQCTD) will be responsible for enquiring and
investigating all quality-related complaints and other trade-related complaints falling
under the jurisdiction of the respective RAs.

Promoting Cross-border Trade in Digital Economy

• Facilitating E-Commerce Exports:

o FTP 2023 outlines the intent and roadmap for establishing e-commerce hubs and related
elements such as payment reconciliation, bookkeeping, returns policy, and export
entitlements.
o The consignment-wise cap on E-Commerce exports through courier has been raised from
₹5 Lakh to ₹10 Lakh in the FTP 2023.
o Dak Ghar Niryat Kendras shall be operationalised throughout the country 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.
o Integration of Courier and Postal exports with ICEGATE will enable exporters to claim
benefits under FTP.
SCOMET: Special Chemicals, Organisms, Materials, Equipment And Technologies:

• Streamlining SCOMET Policy:

o More emphasis on the "export control" regime for better integration with export control
regime countries.
o A robust export control system in India would provide access to dual-use high-end goods
and technologies to Indian exporters while facilitating exports of controlled
items/technologies under SCOMET from India.

Other initiatives by the Government of India:

• The Government has undertaken several measures like opening new sectors for FDI, improving
the business environment, removing regulatory barriers, recognizing startups and introducing
schemes like Production Linked Incentive Scheme to enhance production and productivity,
attract investments and create jobs.
• As a result of its focused efforts, India achieved its highest-ever exports of over USD 676
billion in 2021-22, well on the way to achieving USD 750 billion in 2022-23.
• India has inked 13 Free Trade Agreements along with six limited-coverage Preferential Trade
Agreements and is negotiating new trade agreements with the European Union, the UK, Canada
and other countries on a fast-track basis.
• Over the next five years, the Government plans to focus on introducing path-breaking reforms to
strengthen its relations with different countries, which will help in setting a robust foundation to
achieve its strategic vision of becoming an export hub globally.

Impact of New Foreign Trade Policy 2023 on Export

• FTP 2023 has some provisions that will specifically help MSMEs.
o It has reduced the threshold of minimum exports required for the recognition of exporters
as status holders.
o Now, many smaller exporters can achieve higher status and avail of benefits that will
reduce transaction costs. User charges have also been reduced for MSMEs under the
popular Advance Authorisation and EPCG schemes and all charges have been brought
within ₹5,000. It will boost MSME exports.
• Initiatives such as districts as export hubs and the promotion of e-commerce exports have the
potential of translating into more exports.
• The FTP has also tried to make life easier for exporters and traders, specifically MSMEs, in a
number of ways. Measures have been announced to improve the ease of doing business
through a reduction in transaction costs and e-initiatives.
• Since fiscal incentives are out of the reckoning because of WTO restrictions, FTP 2023 focuses
on the continuation of duty remission schemes that are WTO compliant. That the FTP does not
come with an end date is of great comfort to the industry.
 • No uncertainty regarding the continuation of input duty remissions schemes.
• RoDTEP and RoSCTL, and timely payments by the government, will help exporters do
their business with more confidence.
• Amnesty Scheme under the FTP 2023 will address default on Export Obligations and boost
exports.

Conclusion:

• The $2 trillion target for exports set for 2030 endorsed by FTP 2023 comprises $1 trillion of
goods exports and $1 trillion of services exports.
• If the government stays vigilant and updates the FTP, responding to the needs of exporters, it
could play an important role in helping meet the $2 trillion export target.