FTP 2023: India’s tryst with foreign trade

– By Kulraj Ashpnani and Pratik U Shah

Foreign Trade Policy (FTP) is often a reflection of the Government’s vision on positioning the country in the global market. Announced for a 5-year period, the FTP intakes various progressive measures to grow exports and protectionist measures to control imports into India. The initial two FTPs (1992 and 1997) aimed to eliminate the post-independence trade restrictions and promote India’s integration with the global economy. Subsequently, the focus of FTPs shifted towards boosting exports with various incentives schemes, such as the Merchandise Exports from India Scheme and Service Exports from India Scheme.

The sixth FTP, FTP 2023, was announced on March 31, 2023. FTP 2023 marks a significant departure from the earlier policies as it focuses on creating a conducive environment for Indian exporters. FTP 2023 is based on four key pillars, viz. incentive to remission, export promotion through collaboration, automation, and a focus on e-commerce. With a long-term vision and no sunset date, the policy is dynamic and enables businesses to formulate long-term strategies with confidence.

Ease of doing business remains the priority of the Government and the same gets showcased time and again in the FTP 2023. The policy aims to digitise trade documentation and automation of applications, as well as approvals. In several cases, the application processing time has been proposed to be reduced to as low as one day. The revamped ‘e-Certificate of Origin’ platform will enable self-certification and automatic approvals. Initiatives will be taken for electronic interchange of data with partner countries. In the past, the Government has automated the customs clearance process by introducing a slew of measures like eSanchit portal and faceless assessments. The FTP 2023 complements the recent National Logistics Policy, which aims to reduce logistics costs to the global average by 2030 and will also contribute to the ongoing digitisation of customs processes, resulting in a more cost-effective and efficient operating environment for businesses. 

Internationalising the Indian Rupee (INR) has always been the elephant in the room in trade discussions with other countries. The Indian Government last year took leverage of the sanctions that hit Russia and cash strapped Sri Lanka by introducing international trade settlements in INR. FTP 2023 now extends all benefits for payments realised in INR, through special vostro accounts set up as per the RBI. This should augment the usage of INR, making it a globally acceptable currency.  

Additionally, the FTP 2023 established a policy framework to transform India into a merchanting trade hub, by allowing the merchanting trade of the shipment of goods from one foreign country to another, without involving Indian intermediaries or touching Indian ports. This move will create new job opportunities and improve the country’s overall trade performance, making it more resilient to external shocks and improving its negotiating capabilities in international trade. Certain places in India, like GIFT City, could become significant hubs for merchanting trade like Dubai, Singapore and Hong Kong.

In recognition of the immense potential of e-commerce in international trade, the FTP 2023 focuses on creating an enabling environment that will facilitate the growth of e-commerce exports. Several measures have been extended to the e-commerce industry, like increasing the value limit for exports through couriers to INR 1,000,000 per consignment, promoting e-commerce through postal routes and handholding and outreach schemes to promote e-commerce exports. The policy also proposes to establish E-Commerce Export Hubs, which would serve as a centre for favourable business infrastructure and facilities for cross-border e-commerce activities.

As it is said, a no change, is at-times, a good change. FTP 2023 retains several age-old popular schemes of Advance Authorisation, Export Promotion Capital Goods (EPCG) Scheme. The fees connected to these schemes have also been reduced to ensure their wider acceptability. The procedural ease and automation in processing will usher a new life to these schemes.

In line with ‘Vivad se Vishwaas’ initiative, which sought to settle tax disputes amicably, the FTP 2023 introduces a special one-time Amnesty Scheme, to address default on export obligations under the Advance Authorisation and the EPCG scheme. As per statistical data, many license holders have failed to achieve the export obligations under both these schemes. All pending cases of the default in meeting export obligations can now be regularised on the payment of all customs duties that were exempted, in proportion to unfulfilled export obligation. The interest payable is capped at 100% of the exempted duties under these schemes. This is a welcome move that is expected to settle the pending cases and benefit the exporter community.

Overall, FTP 2023 is a forward-looking policy that shall have a positive impact on India’s economy and trade relations. It is a true reflection of remarkable opportunities that India now presents. 

(Kulraj Ashpnani is the Partner and Pratik U Shah is the Senior Associate at Dhruva Advisors LLP).

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