Foreign Trade Policy (FTP) (2015-2020)
In the dynamic landscape of international commerce, nations must craft strategic policies to navigate the global waters. India, a key player in the world economy, unveiled its Foreign Trade Policy (FTP) for the period 2015-2020, outlining a roadmap for enhancing trade and economic engagement on the global stage.
Table of Contents
Vision, Mission and Objectives
The vision of the Foreign Trade Policy (FTP), 2015-2020, is to make India a significant participant in world trade by the year 2020 and to enable the country to assume a position of leadership in the international trade discourse.
Government aims to increase India’s exports of merchandise and services from $ 465.9 billion in 2013-14 to approximately $ 900 billion by 2019-2020 and to raise India’s share in world exports from 2 per cent to 3.5 per cent.
The Foreign Trade Policy (FTP) for 2015-2020 seeks to:
Provide a stable and sustainable policy environment for foreign trade in merchandise and services;
Link rules, procedures and incentives for exports and imports with other initiatives such as ‘Make in India ‘, ‘Digital India ‘ and ‘Skills India ‘ to create an ‘Export Promotion Mission ‘;
Promote the diversification of India’s export basket by helping various sectors of the Indian economy to gain global competitiveness;
Create an architecture for India’s global trade engagement with a view to expanding its markets and better integrating with major regions, thereby increasing the demand for India’s products and contributing to the ‘Make in India ‘ initiative; and
To provide a mechanism for regular appraisal in order to rationalise imports and reduce the trade imbalance.
Multiple Incentive Schemes Brought Under Two Umbrellas
In a drastic change of stance in keeping with global trading norms under the World Trade Organisation (WTO), the new Foreign Trade Policy (FTP) seeks to consolidate all previous export incentive schemes under two: (a) Merchandise Exports from India Scheme (MEIS); and (b) Services Exports from India Scheme (SEIS). The MEIS will be targeted for export of specified goods to specified markets and SEIS is meant for export of notified services in place of a plethora schemes earlier.
Setting the Stage
The Foreign Trade Policy (FTP) 2015-2020 was crafted against the backdrop of a changing global economic scenario. India, aspiring to be a significant player in international trade, recognized the need for a robust policy framework that could not only boost exports but also attract foreign investment.
Simplification and Digitization
One of the pillars of the Foreign Trade Policy (FTP) was the simplification of processes to ease the burden on businesses. The policy aimed to reduce bureaucratic red tape, making it easier for companies to engage in cross-border trade. Additionally, a strong push towards digitization was evident, with the introduction of online platforms to streamline documentation and customs procedures.
Focus on Ease of Doing Business
With an emphasis on “Make in India,” the Foreign Trade Policy (FTP) sought to improve the ease of doing business. This included initiatives to enhance infrastructure, reduce transaction costs, and provide a conducive environment for both domestic and foreign businesses to thrive. The goal was to transform India into a manufacturing hub and encourage the production of goods for both domestic consumption and export.
Boosting Exports
A significant aspect of the Foreign Trade Policy (FTP) was its focus on boosting exports. Various schemes, such as the Merchandise Exports from India Scheme (MEIS) and the Services Exports from India Scheme (SEIS), were introduced to incentivize exporters. These schemes provided financial assistance and rewards, encouraging businesses to explore new markets and increase their global footprint.
Special Economic Zones (SEZs)
SEZs played a pivotal role in the (Foreign Trade Policy) FTP’s strategy. These designated areas aimed to provide a hassle-free environment for businesses, offering tax incentives and streamlined regulatory processes. By creating these zones, the government sought to attract foreign investment and promote export-oriented growth.
Sustainable Trade Practices
Recognizing the importance of sustainability in the modern era, the Foreign Trade Policy (FTP) incorporated measures to encourage environmentally friendly trade practices. Incentives were provided for businesses adopting green technologies and sustainable production methods, aligning economic growth with ecological responsibility.
A Critical Review of Foreign Trade Policy (FTP), 2015-2020
Feasibility of export target:
Doubling of export earnings from $ 465.9 billion in 2013-14 to $ 900 billion in 2019-2020 requires a CAGR (compound annual growth rate) of 11.6 per cent. However, A.V. Rajwade argues that, given the fact that the actual CAGR has been much below this (and was, indeed negative in 2014-15 and 2015-16), achieving the above targeted rate of growth is not achievable “ whatever the sops, subventions, subsidies or the (unquantifiable) benefits of procedural simplification are in the policy “.
Omissions in FTP:
According to Rajiv Kumar, there are three major omissions in Foreign Trade Policy (FTP), 2015-2020.
Lack of a policy for ramping up foreign tourism in which India is truly a poor performer. With its meagre 7.5 million foreign tourist arrivals per year, India is losing out on a major employment expansion opportunity.
The MSME sector which produces 45 per cent of manufacturing output and almost 40 per cent of total exports, receives only cursory treatment without any tangible steps to make it a part of global value chains or improving access to needed technologies and markets.
Foreign Trade Policy (FTP) leaves the large panoply of export promotion and facilitation institutions virtually untouched, despite the majority of them not contributing effectively to the export effort.
Mid-Term Review of Foreign Trade Policy (FTP), December 2017
Some additional measures to help India’s foreign trade sector were announced in the Mid-Term Review of the Foreign Trade Policy (2015-2020) released on December 5, 2017. Some more measures were announced on December 15, 2017. Important measures are as follows:
(a) MEIS incentives for two sub-sectors of textiles (i.e., readymade garments and made-ups) increased from 2 per cent to 4 per cent, involving additional annual incentives of RS 2,743 crore; (b) across the board increase of per cent in existing MEIS incentive for exports by MSMEs/labour -intensive industries amounting to RS 4,576 crore;
(c) to provide an impetus to the services trade, the SEIS incentives have been increased by 2 per cent for notified services amounting to RS 1,140 crore; (d) new trust based Self Ratification Scheme introduced to allow duty free inputs for export production under duty exemption scheme with a self-declaration; € a special complaint redressal services has been activated on the DGFT website as a single window contact point for exporters and importers for resolving all foreign trade related issues;
(f) steps announced to improve ease of trading across borders; (g) under advance Authorization EPCG Scheme, 100 per cent EOUs, exporters have been extended the benefit of sourcing inputs/capital goods from abroad as well as domestic suppliers for exports without upfront payment of GST; and (h) second hand goods imported for the purpose of repair or re-engineering have been made free, thereby facilitating generation of employment in the repair services sector.
A special package was approved for the leather and footwear sector on December 15, 2017 with an approved expenditure of RS 2,600 crore over the three years from 2017-18 to 2019-20.
Challenges and Adaptations
While the Foreign Trade Policy (FTP) outlined an ambitious vision, it also faced challenges. Global economic uncertainties, geopolitical tensions, and unforeseen events like the COVID-19 pandemic required adaptability. The government responded by introducing amendments and extensions to certain policies, showcasing a nimble approach to the evolving global scenario.
Trade Policy of India After 1991
Impact and Achievements
As the policy neared its conclusion in 2020, it was crucial to assess its impact. The Foreign Trade Policy (FTP) played a pivotal role in enhancing India’s global trade standing. Exports saw a significant uptick, and the country became a more attractive destination for foreign investors. The focus on digitization and ease of doing business contributed to a more business-friendly environment.
Looking Forward: FTP 2021-2026
With the Foreign Trade Policy (FTP) 2015-2020 setting the stage, India continued its journey towards becoming a global economic powerhouse. The subsequent Foreign Trade Policy (2021-2026) built upon the successes and addressed the challenges faced during the previous period. It further emphasized innovation, technology adoption, and diversification of export markets.
Conclusion
In the grand theater of international trade, India’s Foreign Trade Policy (2015-2020) emerged as a script aimed at propelling the nation into a leading role. Through simplification, incentivization, and a commitment to sustainable practices, the policy laid the foundation for a more competitive and resilient Indian economy on the global stage. As the baton passed to the next phase, India’s journey in the realm of foreign trade continued, shaped by the lessons learned and the successes achieved during this transformative period.
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