Approach:
- Introduction on the definition & nature of FTP.
- Give the present status of India’s foreign trade.
- Mention the reasons for new FTP.
- Conclusion – what should be expected in the new FTP.
A Foreign Trade Policy is an elaborate policy guideline and strategy to promote the export of goods and services, usually with a duration of 5 years. It sets out the regulations for cross-border trade and reveals the Government’s position on a host of crucial policy variables.
Revisited and notified every five years since the 1991 economic reforms, the FTP has been the guiding beacon for all stakeholders. The last FTP was notified in 2015, and the new policy was due in April 2020. However, it has been periodically extended since then, and the new policy is expected by September 2022.
Current status of India’s foreign trade : India achieved highest good exports in 2021-22 at US$ 419.7 billion. However, there was a significant jump in the imports, which also recorded their highest level ever at US$ 611.9 billion. The trade deficit stood at US$ 192.2 billion. The trend is similar in 2022-23 so far. For Q1 FY2022-23, the exports were US$ 119 billion, imports US$ 189.8 billion and trade deficit at US$ 70.8 billion. India’s share in world exports of goods had been declining before the reforms and had fallen to 0.5% in 1990. It has improved in the post-reforms period to touch 0.7% in 2000 and 1.8% in 2021.
Need for a new FTP ? :
- A new policy is desired in consonance with the altered nature of international trade especially after the introduction of Global Value Chains (GVCs). India hasn’t been able to truly leverage the potential of GVCs in comparison to China.
- Further, the onset of the pandemic followed by the Russia-Ukraine Crisis has created opportunities for India to boost its exports in fellow countries. For instance, Pandemic made countries adopt a China plus one policy that provides an opportunity to boost Indian exports.
- A revamped policy is desired to clarify the country’s position and alignment with flagship programmes like ‘Local for Global’ and PLI schemes.
- India is in the process of concluding critical Free Trade Agreements (FTAs) with the U.K, Australia and Canada that warrants a revamped policy for leveraging the benefits of FTAs.
- The surge in input and fuel costs are hitting the MSMEs. There’s a rise in prices of raw materials such as steel, and plastics along with a shortage of shipping containers and labour, making matters worse. MSMEs are finding it difficult to take full advantage of the increase in demand and hope the new FTP will ease their woes.
- Various export incentive schemes had to be phased out after India faced challenges at the World Trade Organization (WTO). These need to be reintroduced in compliance with the WTO norms g., India discontinued the MEIS scheme, and introduced duty neutralisation rates under the Remission of Duties and Taxes on Exportable Products (RoDTEP). It will refund embedded duties and taxes not refunded earlier, such as fuel, stamp and electricity duty.
- Some export-oriented businesses have been adversely impacted by certain ad hoc, mistimed, and contradictory changes to the Foreign Trade Policy, 2015.
The new FTP must revert to the earlier trend of gradually reducing customs duties to levels prevailing in East Asia. It must keep access to imports open especially in important areas where technology is changing rapidly. It must give clarity on the incentives and benefits available for e-commerce exports. India is dependent on imports for a range of products, so the new trade policy should boost domestic manufacturing and should make it competitive. One of the key highlights of the new FTP would be the ‘Districts as Export Hubs’ scheme. Under the scheme, the focus will be on 50 districts that have products with huge export potential. Additionally, every scheme should be compliant to WTO norms.