GS Paper 3
Syllabus: Indian Economy
Context: Ministry of Commerce and Industry launched the Foreign Trade Policy 2023, which will come into effect from April 1, 2023.
- FTP 2023 sets a $2 trillion target for exports of goods and services by 2030 with a shift from incentives to remission and entitlement-based regime.
What is an FTP?
A trade policy is a government policy that affects the number of goods and services a country exports and imports.
Significance of FTP:
| Significance | |
| Export Promotion | Increases revenue through exports and stimulates economic growth |
| Encourages exports and attracts foreign investment | |
| Collaboration with States and Districts | Facilitates export promotion at the regional level |
| Economic growth | Reduces transaction costs and simplifies export processes |
| It facilitates the flow of the economy in a country and increases foreign exchange in a country. | |
| For domestic consumer | It aids in facilitating free trade and liberalization and improving the overall market for domestic consumers of a country. |
Aim of FTP 2023:
- To enhance the competitiveness of Indian exports in the global market (India’s overall exports are about to reach US $760 billion this year)
- Promote sustainable development of the country’s trade sector
- Make India a leader in specific sectors such as pharmaceuticals, engineering goods, and textiles
- To promote a digital economy and leverage technology to enhance the competitiveness of Indian exports.
The Key Approach to the policy is based on these 4 pillars:
- An incentive to Remission (Reduction/cancellation of a debt, duty, or penalty)
- Export promotion through collaboration – Exporters, States, Districts, Indian Missions
- Ease of doing business, reduction in transaction cost and e-initiatives and
- Emerging Areas – E-Commerce Developing Districts as Export Hubs and streamlining SCOMET policy
Major Features of FTP 2023:
| Feature | Description | Significance |
| Process Re-Engineering and Automation | The new policy focuses on export promotion and development through automated IT systems for various approvals, making it easier for MSMEs and others to access export benefits. | It will also encourage MSMEs to participate in the global market. |
| Towns of Export Excellence | Four new towns (Faridabad, Mirzapur, Moradabad, and Varanasi) have been designated as Towns of Export Excellence (TEE) in addition to the existing 39 towns. The TEEs will have priority access to export promotion funds under the MAI scheme. | It will boost the exports of handlooms, handicrafts, and carpets. |
| Recognition of Exporters | Exporter firms recognized with ‘status’ (e.g. 2-star, 4-star, 5-star ratings) based on export performance will now help in skilling and training (similar to the ‘each one teach one’ initiative) | This will help India build a skilled manpower pool capable of servicing a $5 Trillion economy before 2030. |
| Promoting export from the districts | 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 the grassroots trade ecosystem. | It will help in identifying and promoting local products and services. |
| Streamlining SCOMET Policy | India is placing more emphasis on the “export control” regime to comply with the international treaties and agreements entered into by India.
SCOMET: “Special Chemicals, Organism, Materials, Equipment and Technologies” items are dual-use items having the potential for both civilian applications as well as weapons of mass destruction. |
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. |
| Facilitating E-Commerce Exports | The 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. | It will help Indian exporters tap into the potential of e-commerce exports and increase their global reach. |
| Facilitation under the Export Promotion of Capital Goods (EPCG) Scheme | The EPCG Scheme, which allows the import of capital goods at zero Customs duty for export production, is being further rationalized.
Additional schemes such as the PM MITRA scheme have been added to claim benefits under the Common Service Provider scheme.
Battery Electric Vehicles, Vertical Farming equipment, Wastewater Treatment and Recycling, Rainwater harvesting systems, and Green Hydrogen are added to Green Technology products – will now be eligible for reduced Export Obligation requirements under EPCG Scheme
|
It will promote domestic manufacturing and encourage investment in capital goods. |
| Facilitation under the Advance authorization Scheme (AAS) | AAS provides duty-free import of raw materials for manufacturing export items.
It has been now extended to the export of the Apparel and Clothing sector |
It will promote domestic manufacturing and encourage investment in the textile sector. |
| Merchanting trade | Merchanting trade involves the shipment of goods from one foreign country to another foreign country without touching Indian ports, involving an Indian intermediary.
Merchanting trade of restricted and prohibited items under the export policy would now be possible. |
It will help convert financial centres such as GIFT city etc. into major merchanting hubs as seen in places like Dubai, Singapore and Hong Kong. |
| Amnesty Scheme | Similar to the “Vivaad se Vishwaas“ initiative, the government has introduced a special one-time Amnesty Scheme under which Exporters who have been unable to meet their obligations under EPCG and Advance Authorizations can be regularised on payment of all customs duties exempted in proportion to unfulfilled export obligations.
The interest payable is capped at 100% of these exempted duties under this scheme. |
It will help in reducing litigation and fostering trust-based relationships to help alleviate the issues faced by exporters. |
About the Previous Trade policy: The Foreign Trade Policy 2015-20
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.
Insta Links:
Mains Links
Critically analyse the current Foreign Trade Policy 2023 (250 Words)
Prelims Links:
The SEZ Act, 2005 which came into effect in February 2006 has certain objectives. In this context, consider the following: ( UPSC 2010)
(1) Development of infrastructure facilities.
(2) Promotion of investment from foreign sources.
(3) Promotion of exports of services only.
Which of the above are the objectives of this Act?
(a) 1 and 2 only
(b) 3 only
(c) 2 and 3 only
(d) 1, 2 and 3
Ans: A
A “closed economy” is an economy in which (UPSC 2011)
(a) the money supply is fully controlled
(b) deficit financing takes place
(c) only exports take place
(d) neither exports nor imports take place
Ans: D
