India’s new trade policy aims at $2tn exports by 2030
India's Foreign Trade Policy (FTP) aims to achieve $2tn in exports by 2030, split equally between goods and services, and encourages trade settlements in rupees. The policy takes effect from 1 April and is designed to expand India's share in the global supply chain and exports. The government has launched a dynamic policy without a sunset clause and will launch a ?massive, focused, concentrated? global outreach in the next four or five months, involving Indian missions abroad to boost exports.
India on Friday announced a Foreign Trade Policy (FTP) targeting $2 trillion in exports by 2030, split equally between goods and services that does not have a so-called sunset clause, and which encourages trade settlements in rupees.
The new trade policy will be effective from April 1.
Expressing confidence in Indian industry after launching the FTP 2023, Union commerce minister Piyush Goyal said any ambitious target could be achieved provided “we explore every possible opportunity” in terms of sectors and geographical locations. Citing Prime Minister Narendra Modi’s vision for “Atmanirbhar Bharat” (self-reliant India), the minister added that India is set to expand its share in the global supply chain and exports. “It is better to aim high and miss, than to aim low and to hit”… “and, of course, what can be better than aim high and achieve,” he said.
Goyal said that India is on track to exceed its target for 2022-23. “Despite global headwinds we estimated$750 billion exports (in both goods and services in 2022-23).”
“By February (2023), it appeared that we could achieve up to $760 billion…, now we feel that we may even surpass it (to reach $765 billion or $770 billion exports in FY23),” he added on the basis of latest data and expected export figures for the last day of financial year 2022-23.
Terming the achievement a major one given the adverse geopolitical situation, he emphasised that the next milestone is the 2030 target — $1 trillion in goods and $1 trillion in services by 2030. “We have to work more on goods, else by 2030 services may surpass $1 trillion leaving you [merchandise exporters] behind,” he added, a reference to the faster pace of growth of services.
The minister said India would launch a “massive, focused, concentrated” global outreach in the next four or five months, involving Indian missions abroad to boost exports.
Explaining key principles behind FTP 2023, Union commerce secretary Sunil Barthwal highlighted six. One, breaking away from the convention of five-year FTPs, the government has launched a dynamic policy without “the sunset clause” as “we presume that our export sector is the sector where sun never sets”.
Two, the policy is pragmatic and can be amended “as and when” there are requirements based on the feedback from the ground, he said. “We are living in a dynamic world, hence policy cannot be rigid,” he added, citing disruptions due to the Covid-19 pandemic and the Ukraine war that required several policy interventions. “We have to be very, very nimble.”
Three, the policy has a “clear direction”, he said, pointing to the target.
Four, the focus of the policy is on enhancing competitiveness rather than relying on trade-distorting subsidies, he said.
Five, the policy would have a decentralised approach, and focus on inclusive growth by connecting districts through e-commerce, the commerce secretary said.
And six, the policy would look to boost rupee trade. “If there are countries, where there’s currency failure, or they are having dollar shortages, we are willing to trade in rupees with them … India is also leveraging its digital payment system” [in global trade].”
Barthwal said FTP is a pragmatic policy document aimed at enhancing India’s share in global trade. He said services exports are growing at “a very high rate of 30%” .
The scope for growth is very clear, he added. “Our global share in merchandise exports is hardly 1.8%, in services it is 4%; given the size of the economy, we can always rise between 7-10%.”
Besides merchandise and services exports, FTP 2023 is also focusing on new sectors such as e-commerce and may soon frame guidelines in consultation with all stakeholders to facilitate exports through e-commerce. Directorate General of Foreign Trade director general Santosh Kumar Sarangi said that e-commerce exports alone have the potential to grow to $200-300 billion by 2030.
FTP 2023 will continue to allow duty-free imports of inputs and raw materials by exporters from overseas suppliers through advance authorisation. It also streamlines the special chemicals, organisms, materials, equipment and technologies (SCOMET) regime, for ease of understanding and compliance by the industry. SCOMET ensures that India’s export controls are in line with its international commitments under various export control regimes. The focus is on simplifying policies to facilitate export of dual use high end goods and technologies such as drones, cryogenic tanks, and certain chemicals.
The new FTP also focuses on ease of doing business through paperless regulation and rule-based automatic approval systems. It also rationalises export performance thresholds to benefit more exporters; for example, the qualifying criterion for a five-star exporter has been reduced from $2 billion to $800 million.
FTP 2023 announced four new Towns of Export Excellence (TEE) — Faridabad for apparel, Moradabad for handicrafts, Mirzapur for handmade carpets, and Varanasi for handloom and handicrafts, in addition to the already existing 39 towns of export excellence. The TEE facility helps in global recognition, provides financial assistance for marketing, and offers common service provider (CSP) facility that helps boost competitiveness of the entire cluster by enabling common use of capital goods for exports.
“The focus of the new FTP has been to promote ease of doing business by way of digitalisation of certain processes, ensure that export incentives are available for exports where settlement is happening in Indian Currency, providing relief to the industry by proposing amnesty scheme and reducing export obligations for sectors focusing on green energy. The changes are likely to help in boosting global trade in Indian currency and ease of doing business,” said Saurabh Agarwal, tax partner at consultancy firm EY.