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India’s foreign trade policy offers an export roadmap.
May 03, 2023

The country’s newly announced Foreign Trade Policy (FTP 2023), which took effect from 1 April this year, is a testament to the forward thinking and realistic approach of Indian policymakers. Launched with the aim of achieving a goal of $2 trillion in exports by the end of this decade, it charts a path for international trade as a significant part of India’s journey towards becoming a $5 trillion economy. The new policy has touched upon various aspects of foreign trade on the basis of developments that have happened over the last eight years. Under the new policy, special emphasis has been given to cross-border trade in digital spheres of economic activity and promoting the ease of doing business, as well as trade facilitation, with needs of the Micro, Small and Medium Enterprise (MSME) sector kept especially in mind.

This policy is expected to have a significant impact on the country’s MSMEs, which are set to benefit from several measures aimed at promoting exports. Within the scope of the new trade policy, e-commerce exporters now enjoy all the benefits offered to other exporters by the FTP. Reduction in fees, inclusion of duty credit scrips, duty exemptions and remission schemes are some of the key provisions under the policy. These would be beneficial to small sellers and MSMEs, as they are aimed at making it easier and affordable for them to engage and operate in overseas markets.

In addition to that, even as the FTP 2023 aims to promote the ease of doing business, it encourages states and districts to address markets abroad and increase their export operations. These steps also make the FTP more dynamic and decentralized, which should create a more conducive ecosystem for the MSME sector to grow and integrate with global value chains.

Dak Ghar Niryat Kendras, which are post offices designated to facilitate exports by MSMEs, have been operationalized to work in tandem with Foreign Post Offices under the FTP 2023. This effort will help simplify logistics, facilitate the MSME sector’s cross-border e-commerce thrust and aid small businesses as they aim to reach potential customers in international markets. To further expand e-commerce exports under the scope of the FTP, the government will be setting up the information technology infrastructure needed to streamline such exports.

At present, the MSME sector faces several challenges in terms of exporting products and penetrating foreign markets. Among these, to name a few, are a lack of awareness about demand patterns in specific foreign markets and low acquaintance with market insights and incentive schemes, apart from relatively weak technology adoption and lack of access to affordable trade finance schemes.

To address these challenges, the government intends to conduct special outreach and training programmes aimed at Indian MSME exporters.

Another key measure introduced under the new foreign trade policy is the setting up of special e-commerce export hubs. These designated hubs will help e-commerce exporters in tackling various logistical costs and challenges, such as custom clearances, processing of returned goods and even warehousing. These special facilities will also allow for various last-mile activities, such as repackaging, labelling and testing, which will in turn reduce logistical costs for Indian exporters.

To promote this cause further, plans to sort out the challenges of inventory held for exports could also be incorporated in the trade policy, as this would help mitigate turnaround delays, apart from reducing logistical and warehousing costs, both of which are critical for Indian competitiveness in markets abroad . It would go well with the policy’s broad thrust of creating a more conducive environment in general for MSMEs to engage in international trade and help them compete more effectively in global markets.

The new trade policy announced by the Union commerce ministry has also doubled the value limit for exports undertaken through courier services from ?5 lakh to ?10 lakh per consignment. Even though this raised cap is a relief for certain sets of Indian exporters, setting a value limit in itself for such exports acts as a limiting factor for businesses which export high-value goods. The overall impact of these measures, however, is expected to be significant, with the policy aiming to increase India’s goods and services exports to $2 trillion by 2030. This is a significant target and will require a nuanced approach, where both exporters and sellers will have to work together smoothly.

Given that the e-commerce model that is prevalent in the country is the platform-as-marketplace model, provisions such as simplified payment reconciliation procedures for e-commerce exporters, distinguishing sellers-on-record from exporters-on-record to reduce the compliance burden on small sellers, will help the cause of reaching the country’s export target.

The dynamic nature of the policy, which can be revised as we go along, offers a great deal of flexibility and adaptability, enabling Indian policymakers to respond effectively to market shifts and the needs of sellers.

In conclusion, the FTP 2023 will help build India as an export hub by enabling and empowering the MSME sector significantly. The policy is expected to provide a significant boost to India’s exports and help the country work towards becoming a developed economy within a quarter century, as envisioned for Amrit Kaal.

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