Shifting Gears: India To Transition From 'Make In India' To 'Made In India' With Foreign Trade Policy-2023

This year, India's services and merchandise exports are expected to surpass $760 billion, which is an encouraging development.

The present Indian government is to be credited for its comprehensive efforts to promote domestic manufacturing, develop small and medium-sized businesses, and construct the necessary logistics infrastructure to improve connectivity. 

The Indian government aims to achieve its ambitious goal of $2 trillion in combined exports (goods and services) by 2030.

For this, the government unveiled new Foreign Trade Policy (FTP) 2023 which aims to strengthen the "export control" regime while promoting exports and making doing business easier for exporters.

The FTP strives to provide a favourable environment for goods and services exports to continue developing at a rapid pace.

The strategy proposes that the fundamental aspects of this ecosystem include real trade facilitation, boosting grassroots exports, discovering new growth channels for exports such as merchanting and e-commerce, and promoting the use of the Indian rupee in trade settlement.

The policy is founded on four pillars: incentive to remission, export promotion through collaboration, ease of doing business, and emerging areas.

The FTP And A New Ecosystem

Foreign Trade Policy 2023 incorporates a wide range of trade facilitation measures that will benefit the entire export ecosystem.

Trade Facilitation

Trade facilitation is a major goal of the FTP, with specific objectives. The latter include granting online approvals within a day for a variety of exporter permissions; lowering application fees for medium, small, and micro-enterprise (MSME) exporters for the advance authorisation (AA) and export promotion of capital goods (EPCG) schemes; revamping e-Certificate of Origin (COO); and paperless filing of export obligation discharge applications.

Grassroots Exports

The FTP 2023 emphasises the promotion of exports from the district level as well as promoting the growth of the local trade ecosystem. In order to identify export-worthy goods and services and address issues at the district level, the strategy establishes partnerships with state governments and advances the districts as export hubs (DEH) project.

Over the past few years, India has signed several key Foreign Trade Agreements (FTAs), and several more are in the pipeline. India-made products reaching international markets through competitive trade agreements and a robust network of export promotion institutions established at the district level is a welcome development.

The decentralised approach stated in the policy focuses on providing global platforms to products and services at the domestic district level. By establishing a district export promotion committee to design and execute district-specific ‘export action plans’, the policy will provide critical touch points for local businesses looking to expand through exports.

Merchanting Trade

India is making strategic moves to enhance its position as a global trade hub with the introduction of merchanting trade. This trade involves goods being transported by sea from one foreign country to another with the help of intermediaries based in India, without the need for berthing at Indian ports.

Eligible for remission schemes, this policy will allow entrepreneurs and businesses to use locations like GIFT city in Gandhinagar as major merchanting hubs, positioning India as a preferred merchanting trade hub in South Asia in the medium-to-long term.

Thus, it will help to maintain market continuity in case of domestic supply shortages and strengthen India's establishment as a global trade hub comparable to Dubai, Singapore and Hong Kong.

India's recent policy recognises e-commerce exports, creating an array of opportunities for small businesses to sell in global markets. All benefits provided for conventional offline exports are now extended to e-commerce exports. 

The inclusion of provisions for cross-border trade of goods and services from India and the promotion of e-commerce will pave the way for the establishment of e-commerce export hubs (ECEHs).

These hubs will be ideal for small businesses as they stand to benefit from involvement by major e-commerce and logistics players and the active participation of the central or state governments.

Greater Use Of Indian Rupee

One standout feature of the FTP has been its encouragement of "Invoicing, payment and settlement of exports and imports" in India rupees. According to rules published by the Reserve Bank of India (RBI), such transactions will be carried out using Special Rupee Vostro Accounts (SRVA), maintained by exporters and importers in licenced Indian banks and their counterpart institutions in partner countries.

Digitisation For Ease and Transparency

The Indian government is implementing technological innovations to simplify the compliance process, including logistics and infrastructure, through platforms like Gati Shakti National Master Plan Portal and Unified Logistics Interface Platform (ULIP).

Moreover, there is an emphasis on developing seamless, unified, and rule-based IT systems to accelerate clearances under the automatic route, which will enable automatic approvals for a variety of permits.

The introduction of online approvals for multiple processes under the Foreign Trade Policy (FTP), such as e-Certificate of Origin and issuance of Electronic-Importer Exporter Code, will not only streamline the compliance chain but also reduce the processing time for authorisations.

Additionally, extending the export obligation period will contribute significantly to simplifying the compliance ecosystem and ease of doing business in the country.

With such enabling measures, Indian businesses and MSMEs will naturally integrate seamlessly with domestic and global value chains.

Looking Ahead

Effective trade facilitation is critical for Indian exporters to increase their efficiencies and benefit from the many FTAs that India has signed or is negotiating.

The emphasis on developing district exports and fostering the establishment of district export centres should firmly establish exports as a fundamental goal in state industrial policy.

Much of the success of merchanting growth will be determined by the facilities that private traders are able to create for utilising the policy. Merchanting will allow traders to route commodities from India that are not permitted to be exported due to concerns about maintaining optimal domestic supplies or other legislative constraints. Global dealers of certain commodities (for example, agricultural products like wheat) operating out of India will no longer be constrained by a lack of domestic supplies.

The emphasis on boosting e-commerce must be combined with on-border trade facilitation through process digitisation. The latter is critical for the expansion of e-commerce by reducing physical delivery time for online-ordered exports.

In conclusion, the new FTP's focus on sustainability, compliance, and ease of doing business, coupled with these developments, will significantly boost India's exports. Therefore, India may well emerge as a global player in international trade, positioning itself as a critical player in international trade.

In conjunction with the National Logistics Policy announced last year, FTP 2023 will prove to be a game-changer in sustaining India’s export growth amidst global challenges.