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The country is likely to end this financial year with total exports of $760 billion compared to $676 billion in FY 22. The policy is expected to give further momentum to India’s export trajectory and offer a level playing field for exporters.
The new Foreign Trade Policy (FTP) 2023 announced on Friday – which went beyond its usual timeline of five years – drew a cautious response from industry stakeholders.
Experts said that the efficacy of the policy would depend on how the dynamic trade movement is interpreted. “Not having an end date can imply both – a short term policy that can be changed anytime or one that would evolve on a considered basis. Just by itself, it does not reflect a long term view but largely on the kind of action that would be taken in an ever changing trade environment,” Manasvi Srivastava, an independent trade expert states.
Elaborating further on some of the highlights of the FTP unveiled, Srivastava adds that the objective of reaching $2 trillion exports by 2030 is an ambitious one given the earlier trajectory. “In the past four years, the average annual growth rate for exports has been 9%. Prior to that, in a good year, it was 12% and even in FY 23 it has been at the same level of growth. However, if we are to reach $2 trillion by 2030, it means achieving 15% annual growth rate for 7 years. That target seems a bit ambitious considering how even the WTO has warned of a contraction in world trade,” he says.
Srivastava also points to India’s trade to GDP ratio which is lower than the world average. “That needs to be considered while going forward and amending the policy,” he states.
Besides trade measures, the policy highlights also mentioned some of the steps taken for the MSME sector. Santosh Sarangi, DG, DGFT said fee reduction is being ensured for MSMEs. “Almost 50-60% of the beneficiaries are MSMEs. From paying about Rs 1 lakh to their licenses earlier, now they would pay only Rs 5000,” he said.
Pushkar Mukewar, CEO/Co-Founder of Drip Capital says that while the new policy promotes WTO-compliant schemes with a major focus on RoDTEP, RoSCTL and duty exemption schemes like the Advance Authorisation /DFIA scheme, it should have addressed some pressing issues of MSMEs. “For example, access to finance is one of the major obstacles to small businesses engaging in global trade. The policy should have included mechanisms and schemes to promote fintech as an alternate funding source,” he says.
Mukewar expects that the FTP will have positive outcomes in the times to come, given its agile structure. “It offers a strong framework for Indian exporters and importers, with the flexibility to adapt the policy in response to any major global trade developments. The government’s desire for wider engagements with states, districts and exporters will enable a robust, uniform trade ecosystem in the country,” he says.
The country is likely to end this financial year with total exports of $760 billion compared to $676 billion in FY 22. The policy is expected to give further momentum to India’s export graph and offer a level playing field for exporters.
Arun Kumar Garodia, Chairman of the Engineering Export Promotion Council of India (EEPC) says that India’s trade regime is coming out of its earlier focus on incentives and subsidies. “This time, the government has started the remission of duties and taxes by way of RoDTEP & ROSCTL. The Amnesty scheme for EPCG and AA (Advance Authorization) is also being introduced, which are positive measures,” he says.
Garodia also mentions that the threshold for export house rating being reduced will imply a boost to many export houses. “There is also renewed push on e-commerce growth and One District-One Product (ODOP) growth. These steps will also bode well for the sector in the long run,” he says.
Other industry experts hailed it as a policy that is forward looking and dynamic. Gunjan Prabhakaran, Partner & Leader – Indirect Tax, BDO India says that the flexibility that it can be amended to address industry requirements is a testament to the fact that the Government realises the need to keep evolving with the changing global requirements.
He added that exporters engaged in the manufacture and export of proprietary products and not an AEO status holder would be much relieved with the extension of the “self-ratification scheme for fixation of input-output norms” to 2-star and above status holders. “Currently, the ratification of self-declared norms by authorities takes a long time which exposes the exporters to a risk of differential duty and interest or additional export obligation after importing inputs duty-free against Advance Authorisation as per self-declared norms.“
The FTP saw many extensions over the past couple of years due to the pandemic and resultant lockdowns. The last extension was given in September 2022 till March 31, 2023.