India's New Foreign Trade Policy for Export and Import

Foreign trade is crucial to India’s economy. The latest Economic Survey shows that about half (45%) of India’s GDP is trade dependent. In this context, the government recently announced India’s new Foreign Trade Policy, 2023. In this post, Compliance Calendar traces the updates in this new foreign trade policy and addresses its impact on export and import businesses in India.

What’s new in the Foreign Trade Policy, 2023?

The foreign trade policies are announced every five years, as a blueprint for the government's economic reforms for the export and import trade in India. The key themes highlighted in this Foreign Trade Policy are as follows:

» $2 trillion in exports by 2030: India has set an ambitious target to clock exports worth USD 2 trillion in the next seven years. This includes contributions from both manufacturing and service segments.

» Cross border trade using Indian currency: The rupee was rather volatile in the last financial year, becoming one of the worst performing currencies of 2022. In order to check this trend and internationalise the rupee transactions, the RBI has introduced new frameworks that encourage rupee-based trades. This helps imports and exports of India settling transactions in domestic currency.

» Focus on automation: The new policy aims to facilitate a digital trade paradigm where licences, interface, compliances, fee structures, exports benefits and other facilities are digitised.

» Towns of Export Excellence and Districts as Export Hub initiatives:

• In line with the budget announcement of One District One Product initiative that aims to promote region-specific goods, the Towns of Export Excellence (TEE) initiative has designated a total of 39 towns as TEEs.

• These would get export funds under the Market Access Initiative, and be able to avail additional benefits under the Export Promotion Capital Goods Scheme (which offers concession to a business for importing machinery from abroad for the manufacturing of export goods).

• The District as Export Hub initiative aims to promote grassroots level exports by state’s institutional mechanisms and export plans tailored for identified products and services.

»Emerging areas of exports: The following two segments have been outlined as the key priority areas for export promotion:

• Dual Use High Technology Goods : This includes technology items of export which can be employed for both civil and military purposes. In order to boost both defence and general manufacturing exports from India, critical dual use goods are essential. It includes a wide range of items from softwares to satellites.

• SCOMET : This stands for Specialised Chemicals, Organisms, Materials, Equipment and Technology. It aims to bolster India’s comparative advantages in the export of pharmaceuticals, technology and defence.

» Consignment cap on couriers enhanced : The consignment cap on E-commerce exports, has been doubled from existing 5 lacs, to 10 lacs.

E-commerce export hubs - eligible for all export benefits

The new Foreign Trade Policy extends all export benefits to e-commerce overseas shipments. This also includes creation of designated zones for warehousing. There will be creation of e-commerce export hubs designed to help ecommerce aggregators undertake everything from stocking to customs clearances and processing of returned orders.

The Prime Minister Mega Integrated Textile Region and Apparel Parks (PM MITRA) scheme was announced in the Budget 22-23 for promoting integrated textile hubs. This has now been notified as an additional scheme eligible for benefits as Common Service Providers (CSP) under the Export Promotion Capital Goods Scheme (EPCG). This includes duty-free import of input fabric, apparel and clothing accessories.

Prompt execution of exports under Special Advance Authorisation Scheme

Under the Special Advance Authorisation Scheme, exports in segments like apparel, clothing can be authorised for faster clearances on self declaration basis by the exporters.

Political risks covered in Insurance

Under the new policy, exporters may get insurance cover for losses suffered on account of countries’ sudden imposition of barriers to trade and political risks. This would include imposition of non-tariff barriers by importing nations after a shipment has left Indian shores. Under the “whole of government” ministerial, which also includes the Ministry of External Affairs, grievances of small exporters will be addressed.

IT and Electronics repair industry

The new policy allows for second-hand goods imports. This means the re-export of old items after repairing them in the country will get export benefits. This would help boost export of refurbished electronic and IT goods without attracting anti-dumping provisions.

Amnesty scheme for shortfalls in export obligations

Several monetary and duty drawback schemes (such as EPCG) introduced in the past linked the financial outlay to meeting export target thresholds. For exports failing to meet these export obligations, an amnesty scheme has been introduced. Under this, DGFT has notified that pending default cases can be regularised by paying customs duties in proportion to the unfulfilled obligation and an interest rate of 100% of such duty exempted.

Thus, the new Foreign Trade Policy can be a useful tool for startups engaged in external trade in India looking for import and export benefits. Compliance Calendar has assisted hundreds of startups and investors in evaluating policies and taking care of the end-to-end filing procedures for foreign trade. Connect with us to make sure all your trade compliances are taken care of.