Foreign Trade Policy (FTP) is a set of guidelines (related to import and export) issued by the Director General Foreign Trade (DGFT) by exercising the powers conferred under Section 5 of the Foreign Trade (Development & Regulation) Act, 1992.
This was enforced by the Ministry of Commerce and Industry (GoI) on 1 Apr 2015 for five years and extended frequently to date.
As per the reports (dated 25 September 2022), The Ministry of Commerce and Industry has decided to extend the FTP for six more months (from 1 October) to meet up the rising demands from leading exporters and Export Promotion Councils (EPCs).
Although the outdated policy needs to be reworked, the government has decided to retain the earlier policy about the volatilities in the global market and shocks in the supply chain, which limits the opportunity to work on a new policy.
Foreign Trade Policy provisions benefiting new avenues
The main objective behind the policy was:-
- Increase exports of goods and services.
- Reduce the transaction cost and time to facilitate the Indian exports making them more competitive.
- Generate employment.
- Increase ease of doing business.
- Improve the exports of selective goods and services.
- Improve the defence exports.
Significant provisions and recommendations
- DGFT has implemented the Niryat Bandhu Scheme to assist and guide new and potential exporters in the fragile areas of foreign trade, the scheme identifies potential MSME clusters to boost exports.
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- This opportunity can be leveraged by Automobile & Manufacturing MSMEs which were most impacted during the COVID. The Vehicle Scrappage Policy 2021 capable of generating ₹ 40,000 GST and 75 lakh employment can amplify the figures further when harnessed in synchronization.
- The Semiconductor industry recently received PLI up to 50% and is the first in the line to get the benefits, favored by growing international demand due to chip shortage worldwide.
- This is the right time for the Polymer industries to switch towards eco-friendly materials which can also feed the quench of “plastic alternatives” in foreign nations.
And the issue of unemployment due to the termination of plants (following the ban on Single-Use Plastic which will be stringent from 1 Dec 2022) can be surmounted by converting the plants into recycling units which can export junk.
- Duty-free imports are provided on certain imports, these can benefit potential entrepreneurs who are looking to establish a new business or expand the existing one, these products are:-
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- Handicrafts – tools, trimmings and embellishments.
- Leather and Footwear – leather garments, trimmings, embellishments and footwear components for footwear (leather as well as synthetic).
- Marine Sector – specified specialized inputs/chemicals and flavoring oils are allowed to the extent of 1% of the FOB value of the preceding financial year’s export.
- Sports Goods and Toys.
- DGFT encourages the development of third-party software for integration with its system to provide a better experience to the users.
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- This helps new start-ups to boost their business, especially the private security firms to fend off cyber-attacks in collaboration with government agencies.
Key advice regarding FTAs
Although India opted out of RECP (concerning China’s dumping policy), India has recently entered into FTA with Australia, UAE and UK. But preferring to be excluded from IPEF might not be prospective specifically with the increasing monopoly created by China (regarding 5 G technology).
Further, India has not harnessed complete trade potential in the South East Asian region, particularly Pakistan, which has flayed the Most Favored Nation status and imposed a high tax on Indian imports, thus discouraging trade diplomacy.Areas to be focused while drafting a new Foreign Trade Policy
There are no Standard Input Output Norms (SION) for:-
- Biotechnology items and related products,
- Insecticides,
- Rodenticides,
- Fungicides,
- Herbicides,
- Anti-sprouting products, plant growth regulators, disinfectants and similar products of all forms, types and grades,
- Waste/Scrap of all types.
Depriving these products from tax exemption, specifically the waste recycling & trading sector which has a huge potential (including the environment perspective) can be harnessed.
Asia receives a maximum quantity of E-waste and India is the global hub.
The new schemes of the government like the Gati Shakti Multi-modal master plan & New Logistic Policy are very coherent with this scheme, in common they aim at reducing the processing time by syncing the functions of overlapping ministries and departments.
But the Draft Indian Ports Bill – 2022 provides wide-ranging powers over the minor ports (under the Concurrent list) to the Union government, which affects the center-state coordination, and hence needs to be revised appropriately.
Can India rethink considering RCEP by specifying negative/positive import lists?
Comment your views below, thankyou
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