The foundation of the new FTP 2023 is built on five key elements of Duration, Dynamism, Decentralisation, Direction and Disaster proofing. The policy acts as a catalyst for increasing the export quantum while considering the size of the Indian economy and its manufacturing and service sector base. The policy is an apt motivation for foreign investors amidst the fact that India has done fairly well in exports. India has now moved from incentive-based regime to remission-based regime with more competitiveness; and rationalisation of many export schemes which are now WTO compatible.

With an aim to cater to the post-pandemic needs of the Global Value Chains (GVCs) and as an extension to the Foreign Trade Policy 2015-20, India’s new Foreign Trade Policy (FTP) 2023 was launched by the Hon’ble Union Minister of Commerce and Industry, Shri Piyush Goyal. The new Foreign Trade Policy 2023 (or the Policy), is a governments’ step towards a dynamic, de-centralised and direction-oriented approach that aims to lead India towards its ambitious targets of USD 2 trillion exports by 2030 (merchandise + exports).

The New FTP 2023 shall further remove uncertainties that have earlier overwhelmed India’s export ecosystem and create continuity and stability in its trade in future. The new FTP 2023 is announced to provide a policy continuity and a responsive framework to situations like the COVID-19 pandemic and the energy crisis following the Russia-Ukraine war. In the Policy, subsequent revisions shall be done as and when required and shall not be linked to any date.

The Policy also involves continuous feedback from trade and industry to streamline processes and update policy and procedures. It is a fresh take on earlier FTPs as previously the changes were being undertaken in a static manner thereby decelerating the growth amidst the emerging situations. The FTP 2023, has therefore, come at a right time to support India’s growing export performance as it is reaches a record high quantum in both merchandise and services.

A close look at India’s export performance (merchandise and services combined) demonstrates a bright picture of growth, continuity and security that instills trust in among foreign investors for establishment of their GVCs. The Table 1 tabulates the quantum of India’s total exports from FY 2010 till FY 2022.

Table 1: India’s Annual Exports (Merchandise + Services) from 2010-11 till 2022-23

The Figure 1 depicts the export volume (combined merchandise and services) from FY 2010 to FY 2022. It shows the rising quantum of India’s exports over the years while also being accompanied by slight decline during the turbulent years. However, the economy was quick to respond and it regained its momentum in the forthcoming years. In 2015-16, India’s export quantum saw a decline owing to the global slow down; however, the exports rose again in the next years at a faster rate suggesting resilience of India’s value chains.

India’s export quantum also saw a decline during the disruption caused by the COVID-19 pandemic. This is marked by a negative export YoY change during the years 2019-2020 and 2020-2021. However, India’s robust and resilient value chains regained their momentum and showed a rise in the quantum of exports in the coming years of FY 21 and FY 22. India’s exports saw a YoY growth of 34.6% in the year 2021-22 reiterating the robustness and resilience of its value chains.

Another key point to note here is the launch of the India’s Foreign Trade Policy in the year 2015 and 2023. The launch of the FTP 2015 was marked with an increase of quantum of exports by 13% in FY 2016. In a similar fashion, it is expected that FTP 2023 shall be a harbinger of immense growth in the export quantum. India shall manage to reach USD 2 trillion exports by 2029-30.

Figure 1: India’s total exports (merchandise + exports) from 2010-11 till 2022-23

Source: PHD Research Bureau, PHD Chamber of Commerce and Industry, data compiled from Ministry of Commerce and Industry, Government of India

The Policy revamps earlier e-Certification of Origin (CoO) platform to include self-certifications that provides automatic approval wherever feasible. With such a platform, the FTP 2023 envisions instilling trust, transparency and visibility in the value chains. It is one of the growth ingredient of the FTP 2023 along with single window scheme for paperless filing, National trade facilitation Action Plan 2023-26, online approvals of applications under automatic route for exporters, reduction in user charges for MSMEs, Ease of doing business in order to reduce transaction costs and widening the basket of RODTEP that aim to go a long way to reduce the cost of compliances and enhance export volumes.

The policy further allows merchanting activities from India (the one involving shipment of goods from one foreign country to another foreign country without touching Indian ports) if it allows an Indian intermediary. This is a welcome development in the Indian export arena and shall further help in integration of India into the Global Value Chains (GVCs).

India’s Foreign Trade Policy 2023 can be categorized into seven major developments in India’s import and export arena. It includes first, ease of doing business, reduction in transaction cost and e-initiatives. These include online approvals without physical interface, reduction in user charges for MSMEs, e-certification of origin and paperless filing of Export Obligation Discharge Applications.

The second ingredient of the Policy includes export promotion initiatives in the form of rationalization of recognition of exporters as status holders. It shall enable more exporters to achieve higher status and reduced transaction costs. The second highlight includes acceptance of Rupee payments and development of towns of export excellence.

The third development of FTP 2023 entails making states and districts as partners by decentralizing export promotion, thereby, bringing greater level of awareness and commitment at the district level. It involves preparation of District Export Action Plans (DEAPs) that outlines the action plan to promote identified products and services which shall make states and districts a meaningful stakeholder and active participants in making India an export hub.

The fourth feature focuses on e-commerce exports through necessary enablement of IT systems, special outreach and training activities for small e-commerce exporters, handholding and increase in value limit per consignment for these exporters. The highlight also focuses on facilitation of Dak Niryat for cross border e-commerce and to enable artisans, weavers and MSMEs in land-locked region to reach international markets.

The fifth aspect involves steps to boost manufacturing in capital goods, dairy sector, battery electric vehicles, and apparel and clothing sector. The sixth highlight include special one-time amnesty scheme for default in export obligations. To instill trust, alleviate issues and reducing litigation, a one-time amnesty scheme is introduced to address non-compliance by Advance Authorization.

The last and seventh highlight of the FTP 2023 is the special emphasis on streamlining the SCOMET licensing procedure. SCOMET includes Special Chemicals, Organisms, Materials, Equipment and Technologies. The policy emphasizes India’s SCOMET export control and general authorisations to streamline licensing of these items to make India’s exports for these items globally competitive. The focus is to simplify policies to facilitate export of dual-use high end goods/technology such as UAV/Drones, cryogenic tank, chemicals etc.

India’s Foreign Trade Policy 2023 is a dynamic and responsive to the emerging trade scenario by taking advantage of its federal system. As a way-forward, the FTP aims to involve wider engagement with states and districts to promote exports from the grassroots to develop each state for India to be able to integrate with the Global Value Chains (GVCs). The focus on streamlining processes for e-Commerce exports shall make it easier for India’s exports to grow in e-commerce space. This development shall help India to increase its visibility in the global arena as a possible e-commerce partner backed with the strength of states and districts. The consultative mechanisms shall be fruitful in resolving issues of trade and industry and thereby enhancing its ease of doing business.

In a nutshell, the FTP would collectively make Indian rupee a global currency and increase India’s competitiveness in the global markets. It shall also bring tremendous increase in employment opportunities with enhanced volumes of exports to the tune of USD 1 trillion in merchandise and USD 1 trillion in services.

(Dr. S.P. Sharma is Chief Economist & Director of Research • PHDCCI (PHD Chamber of Commerce and industry, India)

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