On April 1st, 2023, the DGFT (Directorate General of Foreign Trade) announced a new Foreign Trade Policy, which came into force on the same date. The earlier Foreign Trade Policy 2015-20 was supposed to be valid up to March 31st, 2020. However, it extended up to March 31st, 2023 because of various scenarios like, the COVID-19 pandemic, etc. If we compare India’s merchandise export and service export in FY 2016 (at the beginning of Foreign Trade Policy 2025-20), it was USD 435 billion. It is expected that the export may grow up to USD 760 billion by the end of FY 2023, which is almost 75% growth. Here, being an exporter, you can judge that the export business has good potential in near future. Export has a direct relation to key economic factors like demand and supply. This means Indian goods and services have ample demand in the world market and the only question remains seizing the opportunity at right time. In short, companies that are in the export business have an opportunity to flourish during this period. Any business can flourish if it is well compliant with government norms defined under Foreign Trade Policy so that conducting international activities becomes hassle-free by saving various time-bound costs occurred while doing the compliances like AD Code registration. Speaking of compliance part, let us now focus on this newly announced Foreign Trade Policy.
The new Foreign Trade Policy is more inclined toward technology. It is responding dynamically to emerging situations. The policy is being announced to provide policy continuity and a responsive framework. The approach of the New Foreign Trade Policy is as under:
- From Incentives to Tax Remission:
The classic example of this is, we all know the incentive base MEIS scheme is discontinued, instead RoDTEP came into force in 2021. This scheme is nothing but the remission of duties and taxes on exported products. The RoDTEP scheme allows exporters to avail of credit on those taxes, which are excluded from other export benefits.
- Greater Trade facilitation through technology, automation, and continuous process re-engineering:
The adoption of Faceless Assessment is not just limited to Customs-related activities, but also DGFT-related activities. It may help faster approvals of licenses and amendments made in applications.
- Export promotion through collaboration: Exporters, States, Districts:
Here, EPCs (Export Promotion Councils) play a crucial role. Because these EPCs are the facilitators between the government and industry. Collaboration between EPCs and industries may lead to export promotion.
- Focus on Emerging Areas – E-commerce Exports, Developing Districts as Export Hubs:
Export through the e-commerce channel is increasing. Considering this, the new Foreign Trade Policy focuses on e-commerce export provisions. Apart from this, developing export hubs is also a focus of the policy. Export hubs are collaborative business networks that help small to medium enterprises (SMEs) in the Growth Centre sectors harness opportunities in global marketplaces. Some examples of Districts as Export Hubs for Plastics are Ahmedabad, Panchmahal (Godhra), Dakshina Kannada in Karnataka, Sheopur in Madhya Pradesh, Buldhana in Maharashtra, Jagatsinghapur in Odisha, etc.
The policy widely focuses on ease of doing business, reduction in transaction cost, and e-initiatives. There is a mechanism for the automatic approval of various permission-based schemes like Advance Authorization, EPCG, etc. Their issuance, revalidation, and extension processing time has reduced significantly say, from 1 month to 1 day. Under the new regime, the license application fee for MSMEs under Advance Authorization and EPCG is reduced from 1 per 1000 to the range between Rs. 100-5000 depending on the turnover of that MSME.
To boost the pace of the approval of the Certificate of Origin, the mechanism of e-Certificate of Origin has been introduced. Under this revamped platform, it is proposed to provide self-certification of Certificate of Origin as well as automatic approval of Certificate of Origin. The Certification of Origin data shall also be shared with the partner countries.
In case of issuance of Export Obligation Discharge Certificates (EODC) under the various export, benefits will become paperless. All authorization redemption applications are to be paperless. This is in addition to the application process for issuance being already paperless. With this, the entire lifecycle of the authorization shall become paperless.
To boost merchanting activities from India – Merchanting trade involving the shipment of goods from one foreign country to another foreign country without touching Indian ports, involving an Indian intermediary is allowed subject to compliance with RBI guidelines.
In nutshell, the new Foreign Trade Policy is to be dynamic and responsive to the emerging trade scenario. It widens the engagement with States and Districts of India to promote exports from the grassroots. The focus on E-commerce exports to streamline processes and make it easier for exports to grow in the e-commerce space.
I hope this article helped you to get insights about the new Foreign Trade Policy so that you can decide your business (import-export) strategy in a more dynamic and effective manner.
If you have any questions or comments, please do not hesitate to approach me!
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