India’s Foreign Trade Policy for 2024 is most likely to focus more on the export performance of the country, further deepening its integration into the global supply chains. This policy has focused much attention on how business operations can be eased with advanced technology and the induction of the digitalization method to make a better environment for Indian enterprises. The FTP 2024 is aimed at making India an important entity in the international trading arena, with a particular focus on the needs of the SME sector. To attain this objective, the policy envisions simplification of the processes relating to imports and exports, including e-commerce, to make India a strong foreign trading country.
4 pillars of India’s foreign trade policy 2024
The FTP 2024, which is a part of the interim budget for the year 2024, is conceptualized to be based on four pillars aimed at supporting and rejuvenating the export sector of the country.
Incentive to remission
The major shift in the new policy was a movement away from the traditional schemes based on incentives to those based on remission and entitlements. This will include the expansion of the existing EPCG scheme, which allows for the waiver of customs duty on imports used to produce exports.
The revised scheme under FTP 2024 now covers a range of industries, including textiles and apparel, dairy, and green technologies, with more beneficiations. Apart from that, it has also introduced an Amnesty Scheme—a one-time measure for the industry as a whole to rectify past failure of export obligations by reducing fees and interest attached to such cases. The effort here is to free exporters from the money-related shackles of the past.
Export promotion through collaboration
The policy promotes a more collaborative approach amongst various stakeholders involved in the process of exporting. Incentives would also include the recognition accorded to successful exporting companies that are invited to participate in training programs to bring about improvement in the exporting practices of other businesses.
It strengthens government support at district levels through the setting up of committees that identify and promote local products and services with high export potential. Four new towns are designated as TEE: Faridabad, Mirzapur, Moradabad, and Varanasi. These towns will get special benefits, such as government funding and more recognition globally.
Easy business processes
The most prominent goal of FTP 2024 is to assist ease of doing business through digitalization. It laid down a plan for automating several approval processes in exports and duty-exempted schemes that reduce money and time spent on manual processing. It also introduced provisions for the merchanting trade, where the shipment of goods occurs between two foreign countries through an Indian intermediary without the goods entering Indian ports. The policy has expanded the range of items eligible for merchanting trade to enhance operational efficiency.
Recent policy reforms have also focused on reducing bureaucratic barriers and expedited clearances through digitization. All schemes of DGFT are now available online for application purposes. A centralized help desk service is also provided for the processing of issues related to international trade.
New growth areas
E-commerce exports have been recognized as an area of growing exports with huge potential. FTP 2024 provides the ambit and road map for the development of e-commerce hubs and associated infrastructure apart from linked services such as payment reconciliation and export entitlements.
Outreach and training would be extended to businesses, particularly traditional sectors like weaving and jewelry design, to connect with e-commerce platforms and increase exports to global markets. The integration of Courier and Postal exports on ICEGATE will help exporters avail the benefits under FTP 2024. The refinements in the SCOMET policy will bridge the gap in bringing Indian export standards to par with international agreements and make them competitive.
Incentives to exporters from India
Over a period, India has announced a plethora of export incentives and remission schemes for the benefit of businesses. Some of the notable ones are:
- Goods and Services Tax: The GST introduced in the year 2017 has regarded exports as a “zero-rated supply.” This enables no levy of GST on the goods or services exported and an input tax credit may be claimed by the exporters.
- MAI Scheme: It provides financial assistance relating to marketing-related activities, such as market research, branding, and participation in trade fairs and exhibitions.
- Duty Exemption & Remission Schemes for Indian Exporters: It enables the duty-free import of materials for production under various exemption and remission schemes. Some of the important schemes are:
- Advance Authorisation Scheme: It makes available the duty-free imports of raw materials required for exports at reduced cost of production.
- Scheme of Duty-Free Import Authorisation: Imports of inputs and capital goods are allowed without payment of basic customs duties.
- Duty Entitlement Passbook Scheme: Refunds on some export duties are given as credits.
- Duty Drawback Scheme DBK: This enables firms to claim refunds on inputs used in the making of exported products.
Initiatives on export promotions
Rationalized status holder export thresholds
The FTP 2024 takes an inelastic approach to recognizing exporters for their export performance. To further this initiative, the policy has revised and rationalized the thresholds for achieving status holder recognition downwards, so more exporters achieve higher status. This measure is taken to reduce export transaction costs and make doing business easier to recognize and get benefits.
Reform of merchanting trade
The new policy allows shipping of goods between two foreign countries through India, provided that the goods will not pass through the ports of India. This reform falls in line with the RBI guidelines, except for items listed under CITES and SCOMET. The arrangement is an initiative to make India play a more significant role in international merchanting trade.
Acceptance of rupee payment under ftp schemes
The FTP 2024 supports the internationalization of the Indian rupee by providing FTP benefits for transactions settled in Indian rupees. An RBI circular dated 11th July 2022 has provided that the benefit would be available for the transactions done through a Specific Vostro account, which promotes the use of the rupee in international trade.
Districts as strategic export hubs initiative
Districts will be made the Export Hubs under this policy by designating them as export promotion districts. This will not only identify local goods and services but also require making District Export Action Plans and making the states and the districts active partners in export promotion. The national goals through this, shall get aligned with increased international trade through localised efforts.
District-level capacity building
It supports district-level capacity building for the development of new exporters and to exploration of new markets; outreach and training programs through DGFT field offices and District Industries Centres. The promotion of district-level branding, packaging, design and marketing of products and services will be given emphasis.
Infrastructure and logistics development
Second, infrastructure and logistics-related issues are dealt with by prioritizing testing facilities development, export connections, and other major export-related facilities. The program is to galvanize various existing programs to help translate these concerns into action and to work out the kinks that continue to cause export barriers.
It promotes e-commerce exports by way of education and assistance to small e-commerce businesses in collaboration with experts. The value threshold of courier exports will be increased from the present level to rupees 10,000,000, which will facilitate the ease of participation of small exporters in international trade.
Accumulating e-commerce export hub
There will be designed e-commerce hubs to support the aggregators by offering warehousing, customs clearance, and returns processing. It is these hubs that shall be responsible for the last-mile activities, including labeling, testing and repackaging to ease export processes for e-commerce businesses.
Quality complaints and trade disputes
A new section in the FTP addresses quality complaints and trade disputes by providing for a Committee on Quality Complaints and Trade Disputes. This committee, with representation from various export and trade organizations, will resolve complaints related to product quality and trade issues. The CQCTD shall look into the grievances of exporters, importers, and overseas buyers within three months from the date of receipt. While the committee prefers reconciliatory solutions, the parties may have access to legal avenues if needed.
Future roadmap for foreign trade policy
The MSME accounts for a huge share of India’s exports and GDP. The FTP 2024 provides a strategic roadmap towards increasing India’s share in global trade and achieving an ambitious target of US$2 trillion in exports by 2030. The policy emphasizes the need for structural reforms to ensure long-term competitiveness. It lays great emphasis on automation, IT advancements, trade facilitation, and reducing transaction costs. The policies on e-commerce promotion, research and development, district export hubs, etc., have a huge role to play in shaping India’s future foreign trade landscape.
Conclusion
The Foreign Trade Policy of India in 2024 will therefore be one more step ahead in strengthening the country’s position in world trade. The new policy would rationalize thresholds for identifying status holders with an aim to increase the base of beneficiaries of export incentives to reduce transaction costs and thereby enhance competitiveness. This would also align the country’s merchanting trade with international practices and allow for smoother operations of goods that are in transit through India without actually entering the country. On the other hand, allowing FTP benefits for transactions settled in rupees is, therefore, a strategic move to encourage the use of the Indian currency in international trade.
The initiative to establish districts as export hubs is a focused decentralizing effort of export promotion based on local strengths. It identifies key goods and services at the district level and prepares district-specific export action plans with an empowerment of local businesses to create regional economic growth. This goes in conjunction with district-level capacity-building programs aimed at increasing the export preparedness of new businesses in terms of branding, packaging, and marketing.
The policy has also taken into consideration new trends and challenges in international trade, especially with the rise of e-commerce. It will provide a fillip to e-commerce exports and offer special hubs to help small exporters enter the world market. Besides, the constitution of the Committee on Quality Complaints and Trade Disputes would institutionalize a single contact point for the resolution of trade-related complaints and disputes for boosting efficiency and fairness in India’s export processes. In particular, these comprehensive measures are aimed at building a strong position of India in global trade and ensuring the sustainable growth of the exporting sector.
References
- HSBC Business Go, https://www.businessgo.hsbc.com/en/article/india-foreign-trade-policy (last visited Jul 27, 2024).
- Directorate general of foreign trade: Ministry of Commerce and Industry: Government of India, Directorate General of Foreign Trade | Ministry of Commerce and Industry | Government of India, https://www.dgft.gov.in/CP/?opt=ft-policy (last visited Jul 27, 2024).
- Highlights of foreign trade policy in India 2024, BankBazaar, https://www.bankbazaar.com/tax/foreign-trade-policy.html (last visited Jul 27, 2024).
Author: Nandini Achhra, a 3rd year law student at Vivekananda Institute of Professional Studies
