A TREATISE ON INDIA’S FOREIGN TRADE POLICY by - Sulochana Anu

A TREATISE ON INDIA’S FOREIGN TRADE POLICY
      
Authored by - Sulochana Anu
 
All the countries in the world are engaged in foreign trade to earn foreign exchange. With increasing integration of the Indian economy with the rest of the world, countries cannot solely rely on domestic market. An accelerating growth in exports builds up the strength of the economy.
 
·        Foreign trade is the exchange of capital, goods and services across the borders of the countries
 
·        The countries rich in natural resources export raw materials to other countries whereas some countries with skilled and qualified manpower export finished materials to other countries.
 
·        The international trade policies are aimed at continuity and stability in the market.
 
·        The policies address upgrades in technology, reduction in transaction costs, market expansion and diversification.
 
·         Foreign trade helps in stabilizing the prices of goods all the while maintaining the stability of their demand and supply, making the market highly competitive.
 
·        Employment opportunities are enhanced because of the mobility of resources and labour required for international trade.
 
Bimal Jain Committee classifies the export policy of the Government of India in the pre reform period into three distinct phases: –
Phase 1 (up to the first oil shock of 1973):
·        Phase 1 was characterized by an essentially passive export policy though some steps were taken to under taken.
·        Except for few commodities as such iron ore, stagnation of export income  in this period is largely attributed to domestic policy, which often led to               the falling share of India’s traditional exports.
·        It all started with the devaluation of 36.5% in terms of gold in 1965 with the hope that the devaluation would lead to expansion in export earnings and Indian goods would be less expensive in international markets.
·        On the other-hand imports would decline as the prices of imported goods would increase.
Phase 2 (covering the period from 1973 till early 2000s):
·        During this phase, exports were of high priority.
·        Though the government undertook various steps to increase exports, the Nominal Effective Exchange Rate of the rupee depreciated continuously (NEER), given the lower rate of inflation in domestic as compared to the outside world, which led to a sharp fall in (REER) real effective exchange rate of rupee as a result, the relative profitability increased.
Phase 3: (the period covering the sixth and seventh plan) 
·        This phase emphasized on the technological upgradation free imports and domestic and international competition for the entire industrial sector as being essential for export promotion.
·        With an aim to increase export activities and boost foreign trade, the Foreign Trade Policy (FTP) earlier known as EXIM Policy (Export- Import Policy) in India is announced every five years by the Union Commerce Ministry.
·        The FTP 2004-2009 was the first comprehensive foreign trade policy announced for the nation.
 
FOREIGN TRADE POLICY 2009-14
·        In exercise of powers conferred by Section 5 of the Foreign Trade (Development & Regulation) Act, 1992 (No.22 of 1992) the Central Government notified the Foreign Trade Policy, 2009-2014.
·        The short-term objective of Foreign Trade policy is to reverse the declining trend of exports and to provide additional support especially to the sectors that were hit badly by recession in the developed world.
·        By 2014, it estimated to double India’s exports of goods and services.
·        The long-term objective for the Government is to double India’s share in global trade by 2020.
·        Various policy measures including fiscal incentives, procedural rationalization, enhanced market access across the world and diversification of export markets were taken to help implement the policies.
·        More thrust had been provided to employment intensive sectors, especially in the fields of textile, leather, handicrafts, etc.
 
To continuously increase India’s percentage share of global trade and expanding employment opportunities, certain special focus initiatives have been provided for various domains.
 
 
Foreign Trade Policy 2015-2020
The Foreign Trade Policy (2015-20), launched on 1st April 2015, emphasizes the ‘Make in India’, ‘Digital India’, ‘Skill India’, ‘Startup India’ and ‘Ease of Doing Business’ initiatives along with the framework for increasing exports of goods and services and the employment generation in the country.
Features of foreign trade policy 2015-2020
  • Merchandise Export from India Scheme (MEIS) and Service Exports from India Scheme (SEIS) were launched.
  • Incentives (MEIS & SEIS) are to be available for SEZs.
  • E-Commerce of handicrafts, handlooms, books etc., are eligible for benefits of MEIS.
  • FTP to be aligned to 'Make in India', 'Digital India' and 'Skills India' initiatives.
  • Duty credit scrips made freely transferable and can be used for payments of custom duty and service tax.
  • Agriculture and village industry products to be supported across the globe at rates of 3% and 5% under MEIS.
  • Two institutional mechanisms are launched for stake-holders
i)                   The Board of Trade (BoT) for advisory roles
ii)                Council for Trade Development (CTD) and promotion would have representation from states and UT governments.
  •  Centre for Research in International Trade - is being established not only to   strengthen India's research capabilities in the area of international trade, but also to enable developing countries to articulate their views and concerns from a well-informed position of strength.
Foreign Trade Policy 2021-26
Targeting for $5 trillion economy
·        Making the Indian Economy $5 Trillion by 2025
·        “Vocal for Local” and “Be Local and Go Global” to support domestic products and enhance its export earning
·        To achieve the dream, India needs to register a GDP growth rate of 8% or more in the next few years and triple its exports to $1 trillion by 2025.
·        It has also been suggested the reformation of labour laws, sector-specific strategy to promote the export etc
 
Implementation of District Export Hubs
The "District Export hub initiative” will be a significant part of the new policy which aims to help small businesses and farmers in providing export opportunities through eCommerce and digital marketing platforms and Mapping of GI (geographical indications) products.
 
 
WTO Compliant Policies 
The Government has approved the Remission of Duties or Taxes on Export Products Scheme (RoDTEP) for the export of goods by replacing the MEIS and the rates are yet to be decided under RoDTEP.
 
Conclusion
The new FTP would play a vital role in achieving the target of a $5 trillion economy by 2025, with strategic planning and effective implementation of all the policies and procedures.
 India should also boost the export of both goods and services systematically by addressing domestic and global constraints effectively via reducing the transaction cost, implementing WTO compliant policies, and enhancing the ease of doing business.