Analysis Of India's New Foreign Trade Policy (FTP) 2023 -2028 - IMPRI Impact And Policy Research Institute

Policy Update
Mohd Asif

India unveils 'dynamic' foreign trade policy, eyes USD 2 trillion exports by 2030, foreign trade policy, latest news, india news, Foreign Trade Policy (FTP) 2023, finance, economy

Introduction

The Indian Government, specifically the Ministry of Commerce & Industry, Consumer Affairs & Food & Public Distribution and Textiles, has introduced the India’s new Foreign Trade Policy (FTP) 2023 which has been already launched with the aim of enhancing exports and simplifying processes for exporters while strengthening the export control framework. Rooted in trust and collaboration, the policy focuses on four core themes: Incentive to Remission, Collaborative Export Promotion, Ease of Doing Business, and Emerging Sectors. It retains proven schemes from the past while evolving to meet current challenges and demands.

A key objective of FTP 2023 is the One-Time Amnesty Scheme, which allows exporters to settle long-standing pending authorizations and start anew. It also includes initiatives like the Towns of Export Excellence Scheme, recognizing new export hubs, and the Status Holder Scheme, which honors exceptional exporters. Popular schemes such as Advance Authorization and EPCG have been optimized, and merchanting trade from India has been facilitated. The policy places a strong emphasis on streamlining processes and adopting automation to make exporting more efficient.

By integrating advanced IT systems with risk management tools, the policy enables faster approvals in a fully digital, paperless environment. Reduced fee structures and IT-driven schemes aim to make export benefits more accessible, especially for MSMEs and smaller exporters. Another critical focus of the policy is grassroots-level export development. Through collaboration with state governments under the Districts as Export Hubs (DEH) initiative, FTP 2023 aims to identify export-ready products and services and address challenges at the district level. This involves creating district-specific export action plans to support and promote identified goods and services.

Furthermore, the policy strengthens India’s alignment with global export control frameworks. It emphasizes compliance with international agreements and raises awareness about Special Chemicals, Organisms, Materials, Equipment, and Technologies (SCOMET) to ensure adherence to global standards. By addressing both domestic and global priorities, FTP 2023 envisions a streamlined, inclusive, and competitive trade environment that supports India’s growth on the international stage.

Comparative Analysis Foreign Trade Policy (FTP) 2023 and FTP 2015-2020

The Foreign Trade Policy (FTP) 2015-2020 initially set a target of USD 900 billion in exports by 2020. However, this target was extended for an additional three years, with a revised deadline of March 2023. Despite this extension, India is expected to conclude the 2022-23 fiscal year with exports totaling around USD 760-770 billion, a significant increase from USD 676 billion in the previous year (2021-22).

The Foreign Trade Policy (FTP) 2023 brings several important updates compared to the FTP 2015-2020, marking a shift towards more supportive and flexible measures, with a stronger focus on technology and sustainability. Unlike the previous policy, which relied heavily on incentives, the new policy promotes a facilitation-based approach, encouraging collaboration with exporters and simplifying processes. One of the key features is the One-Time Amnesty Scheme, designed to help exporters resolve pending Export Obligation issues under the EPCG and Advance Authorization schemes.

The policy also emphasizes automation and a paperless environment to streamline procedures and make it easier for exporters, particularly MSMEs, to access benefits. A major addition is the Districts as Export Hubs (DEH) initiative, which focuses on promoting exports at the local level by creating district-specific export strategies and working with local export promotion committees. For the growing e-commerce export sector, the policy increases the export cap for courier shipments from ₹5 lakh to ₹10 lakh per consignment and introduces the development of e-commerce hubs to boost small exporters. The policy also strengthens India’s export control system, aligning with global standards like SCOMET.

Furthermore, the Towns of Export Excellence (TEE) program now includes new towns such as Faridabad, Mirzapur, Moradabad, and Varanasi to support exports of items like handlooms and handicrafts. For sector-specific improvements, the policy exempts the dairy industry from Export Obligation requirements under EPCG and extends self-ratification benefits to exporters with a 2-star status under the Advance Authorization Scheme.

FTP 2023 is designed to foster easier, more efficient exports, with a focus on inclusive growth and global competitiveness. The FTP 2023 introduces modern measures like automation and support for e-commerce but lacks clear export targets and detailed plans for key initiatives. It overlooks challenges faced by sectors like textiles and IT and does little to diversify export markets. The reliance on MSMEs adopting digital tools ignores their digital literacy gap, while small exporters still struggle with high costs and poor infrastructure, Overreliance on automation without improving rural connectivity risks leaving smaller players behind.

Salient features of FTP 2023

Process Re-Engineering and Automation

The new Foreign Trade Policy (FTP) 2023 places a stronger emphasis on using technology to simplify and streamline processes for exporters. By relying on automated IT systems with a risk management framework, the policy reduces manual intervention and builds greater trust with exporters. It shifts the focus from offering incentives to creating a supportive, technology-driven environment that promotes collaboration and ease of doing business.

Proven schemes like Advance Authorization and EPCG from the earlier FTP 2015-20 will continue, but with significant upgrades through process re-engineering and digitalization. The policy also introduces a fully paperless, online system to further enhance efficiency and accessibility for exporters, particularly MSMEs. Additionally, reduced fees and IT-enabled services are expected to make export benefits more accessible.

Key duties and exemptions for export production will now be managed by regional offices through rule-based IT systems, reducing manual processes. By the end of FY 2023-24, all operations under Advance Authorization and EPCG, including issuance, extensions, and re-validation, will transition to automated systems. While applications flagged under the risk management system will undergo manual scrutiny, most exporters will benefit from the automated approval process.

This approach aims to ensure a seamless and efficient export experience. For example, automation in trade policies has proven highly effective globally. For instance, ‘Singapore’s TradeNet system’ integrates regulatory approvals into a single online platform, reducing processing times for import/export permits to mere minutes. Similarly, South Korea’s UNI-PASS system provides paperless customs clearance, significantly lowering transaction costs and improving trade efficiency.

Towns of Export Excellence

Four new towns—Faridabad, Mirzapur, Moradabad, and Varanasi—have been added to the list of Towns of Export Excellence (TEE), joining the existing 39 towns. These towns will receive priority access to export promotion funds under the MAI scheme and benefit from Common Service Provider (CSP) support under the EPCG Scheme. This initiative aims to boost exports, particularly for handlooms, handicrafts, and carpets.

Recognition of Exporters

Exporter firms with ‘status’ recognition based on their export performance will now contribute to capacity-building efforts. Inspired by the “each one teach one” approach, 2-star and above status holders will be encouraged to offer trade-related training using a standardized curriculum. This initiative aims to create a skilled workforce to support India’s goal of becoming a $5 trillion economy by 2030. Additionally, the criteria for status recognition have been adjusted, making it easier for more exporters to achieve 4 and 5-star ratings, enhancing their branding opportunities in global markets.

Promoting export from the districts

The new Foreign Trade Policy focuses on collaborating with state governments to strengthen the Districts as Export Hubs (DEH) initiative. This aims to boost exports from the district level and enhance the local trade ecosystem. Through committees at both state and district levels, efforts will be made to identify products and services with export potential and address local challenges. Each district will have a specific export action plan, outlining strategies to promote its unique products and services.

Streamlining SCOMET Policy

India is strengthening its export control framework as it deepens ties with global export control regimes. Efforts are being made to raise awareness about SCOMET (Special Chemicals, Organisms, Materials, Equipment, and Technologies) among stakeholders. The policy is also being reinforced to ensure compliance with international treaties. A strong export control system will help Indian exporters gain access to advanced dual-use technologies and facilitate the export of controlled items under SCOMET.

Facilitating E-Commerce Exports

E-commerce exports hold significant potential, estimated to reach $200–$300 billion by 2030, and require tailored policies distinct from traditional trade. The FTP 2023 sets the stage for creating e-commerce hubs and addressing key aspects like payment reconciliation, bookkeeping, returns policies, and export entitlements. As an initial step, the consignment cap for e-commerce exports via courier has been increased from ₹5 lakh to ₹10 lakh, with plans for further revisions based on feedback.

The integration of courier and postal exports with ICEGATE will allow exporters to claim FTP benefits. A detailed e-commerce export policy is in progress, guided by recommendations from the working committee and inter-ministerial discussions. Additionally, outreach and training programs will help artisans, weavers, garment makers, and jewelry designers adapt to e-commerce platforms, boosting their export potential.

Facilitation under Export Promotion of Capital Goods (EPCG) Scheme

The EPCG Scheme, which enables duty-free imports of capital goods for export production, has been updated with key changes:

The PM MITRA scheme is now eligible for benefits under the Common Service Provider (CSP) aspect of the EPCG Scheme.
The dairy sector is exempted from maintaining average export obligations to help modernize its technology.
Green Technology products, such as Battery Electric Vehicles (BEVs), vertical farming equipment, wastewater treatment systems, rainwater harvesting technologies, and green hydrogen, are now eligible for reduced export obligations under the scheme.

Facilitation under Advance authorization Scheme

The Advance Authorization Scheme allows DTA units to import raw materials duty-free for manufacturing export goods, with the added advantage of catering to both domestic and export markets. The FTP 2023 introduces new facilitation measures:

The Special Advance Authorization Scheme has been extended to the apparel and clothing sector, allowing self-declaration for faster processing of export orders. Norms will be finalized within a fixed timeline.

The Self-Ratification Scheme for setting Input-Output Norms is now available to 2-star and above status holders, in addition to Authorized Economic Operators.

Merchanting trade

The FTP 2023 introduces provisions to make India a hub for merchanting trade, allowing Indian intermediaries to facilitate the shipment of goods between two foreign countries without passing through Indian ports. This includes restricted and prohibited items under the export policy, except for those listed under CITES and SCOMET. Compliance with RBI guidelines will be mandatory. Over time, this initiative aims to transform places like GIFT City into global merchanting hubs, similar to Dubai, Singapore, and Hong Kong.

Amnesty Scheme

The government has introduced a one-time Amnesty Scheme under FTP 2023 to support exporters struggling with Export Obligation (EO) defaults under the EPCG and Advance Authorization schemes. This initiative, inspired by the “Vivaad se Vishwaas” approach, aims to resolve disputes and reduce exporters’ financial burdens. Exporters can regularize pending cases by paying the customs duties proportionate to their unfulfilled EO, with interest capped at 100% of the exempted duties. Importantly, no interest will apply to Additional Customs Duty or Special Additional Customs Duty, significantly lowering the overall interest burden.

This scheme provides exporters with a fresh opportunity to comply with regulations and resume their business without the weight of unresolved cases.

Impact of New Foreign Trade Policy 2023 on Export

The FTP 2023 introduces several provisions designed to support MSMEs. One key change is the reduction in the minimum export requirement for recognition as a status holder, allowing smaller exporters to achieve higher status and access benefits that lower transaction costs. Additionally, user charges under popular schemes like Advance Authorization and EPCG have been capped at ₹5,000, making it more affordable for MSMEs to export. The policy also includes initiatives such as Districts as Export Hubs and the promotion of e-commerce exports, which are expected to drive significant growth in exports. Efforts to streamline export processes, including a focus on reducing transaction costs and implementing e-initiatives, are aimed at making business easier for MSMEs.

While fiscal incentives are limited by WTO rules, the FTP 2023 continues duty remission schemes that comply with international regulations. Importantly, the policy has no expiration date, providing certainty and stability for the industry. Schemes like RoDTEP and RoSCTL, along with timely government payments, will also help boost exporter confidence. The Amnesty Scheme introduced in FTP 2023 is expected to further support exporters by addressing defaults in meeting Export Obligations.

Challenges

MSMEs’ Digital Literacy

For Micro, Small, and Medium Enterprises (MSMEs), which stand to gain significantly from FTP 2023, digital literacy is a key challenge. Enhancing digital skills among MSMEs is crucial for them to fully capitalise on E-Commerce opportunities. To enhance digital literacy among MSMEs, the government and private sector can organize workshops on essential topics like e-commerce, digital payments, cybersecurity, and social media marketing, tailored to the unique needs of different industries.

Collaborating with tech giants such as Google and Microsoft can provide MSMEs with access to tools like Google My Business and Microsoft 365, easing their digital transition. Additionally, creating user-friendly online platforms or mobile apps offering affordable digital skill courses and setting up resource centers in rural and semi-urban areas for hands-on training can ensure broader accessibility and support for MSMEs.

Way forward

Effective trade facilitation is essential for Indian exporters as it helps improve their efficiency and take advantage of the benefits offered by various Free Trade Agreements (FTAs) signed by India. This aligns with India’s Indo-Pacific Economic Framework, which focuses on digitizing cross-border operations, logistics, and transportation. However, the full benefits of these efforts will only be realized if domestic processes are also simplified and made faster. If internal procedures remain complex and time-consuming, the advantages of quicker border clearances and lower costs will be diminished.

Issues like digital signatures, business identification, and international payment systems may also face challenges without alignment between domestic systems and border initiatives. Developing districts as export hubs and linking local industries to global markets is a promising step. The goal is to integrate exports into state industrial policies and encourage small and medium enterprises (MSMEs) to participate in international trade.

However, creating awareness among local producers about the benefits of exporting remains a major challenge. The success of this initiative depends on how well the Directorate General of Foreign Trade (DGFT) works with state and local authorities to strengthen exporters’ capabilities. Given India’s history of weak inter-department coordination, this effort will be closely observed. The introduction of “merchanting trade” in the trade policy is another innovative move aimed at integrating India into the global supply chain.

This policy facilitates the movement of goods between countries without any value addition by Indian producers. However, its success largely depends on private traders building the necessary infrastructure to implement it. Notably, the policy allows the export of certain goods, such as agricultural products, that are otherwise restricted domestically, thus overcoming policy barriers.

To achieve the ambitious target of $2 trillion in exports by 2030, consistent growth in both goods and services exports is required. E-commerce is seen as a key driver in this effort, with its success relying on digitizing trade processes and reducing delivery times. Additionally, settling trade in Indian Rupees (INR) is gradually gaining momentum, with 18 countries opening Special Rupee Vostro Accounts (SRVAs). For now, this mechanism is primarily beneficial for countries facing foreign exchange challenges, such as Sri Lanka and Bangladesh.

However, the policy offers little focus on promoting services exports, despite their remarkable performance. In 2022-23, services exports grew by nearly 30%, significantly outpacing goods exports, and accounted for over 70% of the value of goods exports. Considering the critical role of services in achieving the $2 trillion export target, the lack of initiatives to boost this sector is a major oversight.