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The Government of India announced its Foreign Trade Policy 2023 (FTP 23) on March 31,2023. Piyush Goyal, the Union Minister of Commerce and Industry, Consumer Affairs, Food and Public Distribution and Textiles, launched the policy. It is an open-ended policy and will not end on a targeted date. But that will accommodate the emerging needs in the course of time. The Policy had been based on four pillars. One has been the incentive to remission, two, export promotion through collaboration, three, ease of doing business and the fourth exploring is emerging areas.

Some of the highlights of the FTP 23First, it has emphasised on the continuation of input duty remissions schemes such as, the RoDTEP (Remission of Duties and Taxes on Exported Products) and RoSCTL (Scheme for Rebate of State and Central Taxes and Levies on Export of Garments and Made-ups) and timely payments by the governments. Exporters had been demanding it for a long period. This policy will help exporters and incentivise them. Secondly, measures are there to help MSMEs. Through reduction in transaction cost and e-initiatives, there are some measures to help the sector. All the measures will help to lower cost and production time of the sector and increase competitiveness.

Thirdly, the policy to make districts as production and export hubs has been a welcome policy. If it is realised in the due time it will uplift the economy along with creating a high export facility. Fourthly, the policy of promotion of e-commerce exports has export potentiality. In the policy, it is estimated that annual export potential in this sector can be as high as $200-$300 billion by 2030 from the $5-$10 billion as of now. All the FTP 23 benefits are to be extended to e-commerce exports. Fifthly, the plan to establish a town of export excellence (TEE) is also a thoughtful initiative. Sixthly, the value limit for exports through courier services has been doubled to Rs.10 lakh per consignment. The total impact of this will be high and it will help many exporters. Seventhly, the FTP 23 has given high emphasis on rupee settlement of foreign trade. It means payments for India’s foreign trade items will be settled in Indian rupees whenever it is possible. It has been a long practice method. But this is not a successful one as the importance of rupees is not established in international trade. At the same time, volatility of the exchange value of rupee as against any hard currency is high. But for the last few years, trade through local currency has increased to a good extent. It has been possible due to trade pacts among nations. Contrarily some problems have risen in the settlement of trade in rupee with Russia recently. These problems should be resolved quickly. Eighthly, there are many other policies to help exporters in the FTP 23. The one-time Amnesty Scheme for default in export obligations, streamlining of Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) licensing procedure, for example, may help a lot of exporters. The policy has focussed more online approvals which will ensure ease of doing business.

Some important critical views

Some concrete shortcomings of the FTP 23 have been raised. A notable one has been from Biswasjit Dhar, former Professor of Economics at Jawaharlal Nehru University and a famous trade theoretician. He mentioned that the framework of trade policy in the 21st century had since moved to development and facilitation of trade, but there was no reflection of it in the FTP 23. According to him, “Instead of recasting the vitally important policy, FTP 23 was a compilation of ‘Foreign Trade Procedures’ in which the words regulate, prohibit and restrict found more mentions than the word facilitate.” He pointed out that most countries relied on improvements of product quality and production efficiencies by rapid infusion of technology to expand their presence in the global markets instead of using export incentives.Dhar also pointed to a vital question and wrote that developing districts as export hubs was a noble idea but what was missing had been the commitment of such a programme, towards building efficient trade in infrastructure.

Difficulty in estimating targets of trade

The target of FTP 23 has been one trillion in service exports and one trillion merchandise exports by 2030. In such a globally weak and volatile economic scenario one cannot easily predict any such target. Even Piyush Goyal declined to set export targets for the current year who stated to the media, “It will not be proper to give FY 24 exports target now and we do not want to give any absurd number. Due to the ongoing war, the economies of several countries have become weak and discretionary spending has come down.”