India’s New Foreign Trade Policy 2023 in Effect from April 1: Key Points

India’s Foreign Trade Policy (FTP) 2023 will be dynamic and open to consultative feedback with a target of US$2 trillion exports by 2030. New export hubs have been announced as well as measures targeting the e-commerce, dairy, and apparel and clothing sectors, among others. The new FTP also seeks the internationalization of domestic currency, and will facilitate global trade payments in rupees.

In a departure from tradition, India’s Foreign Trade Policy (FTP) 2023 will not have a five-year target date. The policy will instead be long-term and dynamic, as the government will make amendments as necessary.

The goal is to reach US$2 trillion exports by 2030 by shifting from an incentives to remission and entitlement-based regime.

India is expected to end the fiscal year 2022-23 with a total of US$760-770 billion worth exports, an improvement over the FY 2022 figure of US$676 billion. This was achieved despite various global headwinds that have disrupted supply chains, slowed export demand, and put pressure on trade shipments.

Source: DGFT

The Foreign Trade Policy (2015-20) will remain effective until March 31, 2023, with its last extension announced in September 2022. The policy had been extended multiple times due to exigencies caused by the COVID pandemic and concerns of trade and industry stakeholders. Accordingly several amendments and ad hoc revisions had been made.

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According to the Director General of Foreign Trade (DGFT), Santosh Sarangi, under FTP 2023, a consultative mechanism to address trade concerns will be added to ensure rolling feedback. Sarangi elaborated that if certain sectors felt neglected by the new policy, they would now have recourse.

The Foreign Trade Policy 2023 will achieve better export promotion by fostering partnerships between exporters, states, districts, and Indian Missions. The policy will prioritize enhancing the ease of doing business and targets emerging sectors, such as e-commerce and export hubs.

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Under FTP 2023, the towns of Faridabad, Moradabad, Mirzapur, and Varanasi have been newly designated as Towns of Export Excellence (TEE) for apparel, handicrafts, handmade carpets and dari, and handloom and handicraft products, respectively. These additions expand the TEE list to 43 towns.

The new Foreign Trade Policy 2023 is designed to facilitate greater trade, boost manufacturing, promote exports, further enable ease of doing business & also work towards making Indian Rupee a global currency, adding further impetus to India’s emergence as the global trading hub. – Department of Commerce, GoI Tweet 

Also, the dairy sector will be exempted from maintaining average export obligations under the new policy.

Further, the special advance authorization scheme has been extended to apparel and clothing. Under the Advance Authorization Scheme, inputs required for manufacturing export products can be imported duty-free. The quantity of input allowed for a given product is based on specific norms defined for that export product by the DGFT, which considers the wastage generated in the manufacturing process. Eligible beneficiaries of the Advance Authorization Scheme include manufacturer exporters or merchant exporters affiliated with supporting manufacturer(s). 

FTP benefits have been extended to e-commerce exports to boost their growth to US$200-300 billion by 2030. The value limit for exports through courier service has been raised – from INR 500,000 (US$6081.65) to INR 1 million (US$12,163.30) per consignment. (US$1=INR 82.21.)

The new FTP aims to boost the internationalization of trade in rupees by allowing international trade settlement in India’s currency.

Overall, these changes seek to optimize India’s foreign trade capabilities. 

Highlights of the Foreign Trade Policy 2023

Ease of doing business through online processing and reduction in transaction costs

Online approval times

Foreign Trade Policy permissions will be automatically approved through process simplification and technology implementation. Exporters can expect quicker processing times and immediate approval of applications through the automatic route.

Reduction in user charges for MSMEs

There will be a reduction in user charges for micro, small, and medium-sized enterprises (MSMEs) under Advance Authorization (AA) scheme and the Export Promotion Capital Goods (EPCG) scheme.

This will benefit 55-60 percent of exporters who come under the MSME category.

Certificate of origin

There is a proposal to reform the e-Certificate of Origin platform to allow self-certification of Certificate of Origin (CoO) and its automatic approval – where feasible.

Another initiative being considered is the electronic exchange of CoO data with partner countries.

Paperless filing

All authorization redemption applications will become paperless, in addition to the already paperless issuance application process. This means that the entire authorization lifecycle will soon be conducted in paperless mode.

Export promotion initiatives

Status holder export thresholds have been rationalized

This will enable more exporters to gain higher status due to revised performance thresholds and reduced costs for exporters.

Merchanting trade reform

To enhance merchanting activities, India will allow merchanting trade that involves shipping goods from one foreign country to another foreign country, through an Indian intermediary, without going through Indian ports. This will need to be in compliance with Reserve Bank of India (RBI) guidelines. However, this will not be available for goods and items listed under CITES (Convention on International Trade in Endangered Species of Wild Fauna and Flora) and SCOMET (Special Chemicals, Organism, Materials, Equipment and Technologies) categories. SCOMET items are dual-use having potential for civilian applications and as weapons of mass destruction.

Internationalization of rupee

Foreign Trade Policy benefits have been extended to include rupee realizations through special Vostro accounts that have been set up according to the RBI circular released on July 11, 2022.

Towns of export excellence

Four new TEEs have been added to the list.

These towns or TEEs are industrial clusters that have been recognized for their export performance. They are now being piped to move up the value chain and explore new export markets.

• Recognized associations of units in Towns of Export Excellence can avail financial assistance under Market Access Initiative (MAI) scheme, on priority basis, for export promotion projects for marketing, capacity building and technological services.
• Common Service Providers in the Towns of Export Excellence are entitled for Authorization under Export Promotion Capital Goods (EPCG) Scheme.

Districts to be recognized and promoted as export hubs

This strategy will decentralize export promotion by meaningfully engaging with states and districts as partners. It will result in the identification of district-level products and service offerings. This will necessitate the creation of institutional mechanisms.

Districts would need to prepare District Export Action Plans (DEAPs) to promote identified products and services exports. To achieve this, capacity building will be required, and training, handholding, and outreach programs are envisaged by DGFT field offices in coordination with District Industries Centers.

Export promotion outreach to focus on a) branding, b) packaging, c) design and marketing of the identified product and service items.

Development of infrastructure and logistics

The FTP 2023 aims to address infrastructure and logistics bottlenecks for exports. Districts are to focus on the development of logistics, testing facilities, connectivity for exports, and other export-oriented systems. Districts should tap into various ongoing schemes to support these initiatives.

Boost to e-commerce exports

All FTP benefits will be extended to e-commerce exports. IT systems at the department of commerce, post, and CBIC are to be undertaken over the upcoming 6-month period.

Guidelines are being prepared to facilitate e-commerce exports in consultation with various ministries.

Enabling partnerships between Indian and foreign post offices to boost trade at local, MSME level

To facilitate cross-border e-commerce and enable artisans, weavers, craftsmen, and MSMEs in land-locked regions and hinterlands to access global markets, a hub-and-spoke model will be employed by operationalizing Dak Ghar Niryat Kendras throughout the country in conjunction with Foreign Post Offices (FPOs).

E-commerce export hubs

To assist e-commerce aggregators in stocking, customs clearance, and returns processing, designated hubs with warehousing facilities will be identified and notified.

Furthermore, last-mile activities like labeling, testing, repackaging, etc. will be permitted to take place in processing facilities.

Amnesty scheme for default on export obligations

To support trade and industry and encourage exporters, relief will be provided to those who are unable to fulfill their Export Obligations (EO) against the Export Promotion Capital Goods (EPCG) and Advance Authorization schemes.

An amnesty scheme will be introduced for a one-time settlement of defaults in EO by holders of Advance Authorization and EPCG Authorization. Authorization holders can regularize all pending cases of default in EO by paying all customs duties exempted in proportion to the unfulfilled EO.

The maximum interest will be capped at 100 percent of such duties exempted, while no interest will be payable on the portion of Additional Customs Duty and Special Additional Customs Duty.

The amnesty scheme will be available for a limited period until September 30, 2023, and cases under investigation for fraud and diversion are not eligible.

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