Foreign trade policy revamp

In News

The Government will release a new foreign trade policy in the coming week that could include measures to help push up goods and services exports as well as rein in the runaway import bill. 

About Foreign Trade Policy (FTP)

• Foreign Trade Policy (FTP) has been revisited and notified every five years since the 1991 economic reforms.
• It has been delayed since April 2020 and further extended by six months up to September 30, 2022.
  •  The last FTP was notified in 2015, since then it has been periodically extended.

• A FTP sets out the regulations for cross-border trade and reveals the government’s position on a host of concomitant yet crucial policy variables such as technology flow, intangibles, and so on. 

Image Courtesy:ET

Focus of New Policy 

• New FTP to be implemented from October 1 2022
• The new policy will  focus on promoting ease of trade, e-commerce,  IT-enablement, R&D and export hubs and lowering transaction costs.
• The new FTP will come with a vision statement and provide a roadmap for reaching $1 trillion exports in goods as well as services by 2030.
• Focus on e-commerce; to help MSMEs , district hubs
• Promote digitisation, make available facilities online 

Objectives and Need 

• The current foreign trade policy had certain limitations, which cropped up from time to time. 
  • Some export-oriented businesses have been adversely impacted by certain ad hoc, mistimed, and contradictory changes to the 2015 FTP. 
    • The 2015 FTP incentivised exports by issuing duty-credit scrips directly in proportion to exports.
• Given the economic hardship caused by the pandemic, exporters are hoping that the new FTP will work in a phased manner to address export constraints, review the regulatory and operational framework to reduce the transit costs and create a low-cost operating environment through developed logistics and utility infrastructure.
• The prime objective of a foreign trade policy is to facilitate trade by reducing transaction and transit costs and time. 
  • Due to inadequate upgraded export infrastructure such as ports, warehouses and supply chains, the average turnaround time for ships in India is about three days while the world average is 24 hours.

Criticism

• Beginning the new policy in the middle of a financial year, unlike the traditional clean slate in a new fiscal year, is not ideal.
•  Moreover, exports have been one of the few growth engines firing up the post-COVID recovery, so putting off a policy to bolster outbound shipments was baffling.

Suggestions

• The new FTP must enable exporters to leverage technology in the field of foreign trade. 
  • This will be particularly beneficial for MSMEs to compete with their global peers.
• India needs to invest in upgrading export infrastructure such as ports, warehouses, quality testing and certification centres to stay ahead of technology-advanced countries such as China, which plans to spend $1.4 trillion on infrastructure between 2019 and 2023.
• Similarly, India also needs to adopt modern trade practices that can be implemented through the digitisation of export processes.
  •  This will save both time and cost.
• The government must help MSMEs planning to tap the export potential in existing tariff lines and provide policy support to raise the number of exporting MSMEs and increase MSME exports by 50 per cent in 2022-23.
• It will have to find ways to provide a leg-up to exports and address some of industry’s key concerns, including a buffer against rising interest rates.
•  It should be ‘flexible’ enough to deal with various uncertainties and geopolitical challenges that the world has been witnessing over more than two years.