Context:
The Union Minister of Commerce and Industry, Consumer Affairs, Food and Public Distribution, and Textiles just put out the Foreign Trade Policy 2023.
About
- The new policy, which will take effect in 2023–2024 and replace the old one, which has been in place since 2015, aims to almost triple India’s exports of goods and services from an estimated $760 billion in 2022–2023 to $2 trillion by 2030.
- Exports were able to increase by 75% from $435 billion in 2015–16 to $760 billion in 2022–23 thanks to the old policy.
- The government wants to increase India’s share of worldwide goods and services exports, which is currently very low, to between 7% and 10%.
Provisions:
- The new policy will be changed based on what the industry says and what happens with global trade in the future. It will not have an end date. Even though the policy will last forever, the plans it will approve will only be in place for a certain amount of time.
- Except for a one-time amnesty under the current Advance Authorization and Export Promotion Capital Goods (EPCG) schemes, there are no major new programs that allow the import of capital goods as long as they meet certain export requirements.
- The policy created a new possible export market known as “merchanting trade.”
- When goods go from one foreign country to another through an Indian middleman without ever going into an Indian port, this is called “merchanting trade.”Additionally, it will permit the export of prohibited products.
- Four cities in Uttar Pradesh, Faridabad, Moradabad, Mirzapur, and Varanasi, were each named a centre of export excellence for their work in the apparel, handicrafts, handmade carpets, and handlooms industries.
The policy also plans to set up a special advance authorization system for the clothing and apparel industry. This will help the industry respond more quickly to market needs and fashion trends.
Also, it wants to make it easier for exporters to get star ratings based on how well they do in exporting.
Challenges:
- Low credit availability: Indian exporters have very little recourse to export and trade credit. Even though they make up close to half of all shipments from India, this is particularly true for micro, small, and medium-sized enterprises (MSMEs).
- Indian exporters receive much less financial assistance than their counterparts in other nations. In India, export credit companies distributed $7.6 billion in funds, compared to $39.1 billion in China.
- Bureaucracy: India’s export process takes longer than in many other countries because it needs a lot of paperwork.Indian exporters have to prepare a large number of documents for each step of the shipping process.
- Planning ahead is also necessary due to the fact that certification authorities are not always on duty or open on weekends at Indian ports.
- India’s weakest component is its inadequate infrastructure. India received a score of 68.1 in the 2019 rating of 100 nations by data company Statista based on the caliber of their infrastructure. In order to put this into context, top-ranked Singapore scored 95.4, while Bolivia, which is currently in last place, scored 57.1, lagging by about 10 points behind India.
Initiative to increase exports
- Remission of Duties or Taxes on Export Product (RoDTEP) is a fully automated way for the GST (Goods and Service Tax) Input Tax Credit (ITC) to help increase exports from India.
- ITC lets you get back some of the tax you paid when you bought supplies, consumables, goods, or services that were used to make other goods or services.This aids in preventing both double taxation and the tax cascade.
- Refund of State and Central Taxes and Levies: The program was made available for integrated state and central duties and taxes that aren’t covered by the Goods and Services Tax (GST).
- It was only offered for clothing. The Ministry of Textiles launched it.
- The Foreign Trade Policy (FTP) 2015–20 made the MEIS, or the Merchandise Exports from India Scheme, which gives duty breaks based on the product and the country.
- Under the program, rewards are given out as a percentage of the free-on-board value (2%, 3%, or 5%), and MEIS duty credit scrip can be transferred or used to pay for a variety of duties, including the minimum customs duty.
- To help trade and get more exporters to use the Free Trade Agreement (FTA), a common digital platform for certificates of origin has been set up.