Foreign Trade Policy 2023: Old policy for new world

Source: The post is based on the article “Foreign Trade Policy 2023: Old policy for new world” published in the Indian Express on 5th April 2023.

Syllabus: GS – 3: changes in industrial policy and their effects on industrial growth.

Relevance: About new Foreign Trade Policy 2023 (FTP 2023).

News: Recently, India’s commerce minister unveiled a new Foreign Trade Policy (FTP).

About the legal status of FTP in India

The FTP is notified by the Central Government, in the exercise of powers conferred under Section 5 of the Foreign Trade (Development & Regulation) Act, 1992.

The Act empower the Centre to “make provision for the development and regulation of foreign trade by facilitating imports and increasing exports” and to “make provision for prohibiting, restricting or otherwise regulating… import or export of goods or services or technology”.

What are the salient features of India’s FTP 2023?

How this FTP 2023 is different from previous ones?

What are the challenges associated with the FTP 2023?

Non-updation of Act reflect in FTP: The 1992 Act was set in the 20th-century mindset of regulating and restricting trade and accordingly included trade policy instruments. For example, the framework of trade policy in the 21st century has since moved towards the development and facilitation of trade, but there is no reflection of this in FTP 2023. Instead, the FTP 2023 is a compilation of “Foreign Trade Procedures” in which the words, regulate, prohibit, and restrict find more mentions than “facilitate”.

Not focusing on product and process standards: Most countries moved away from export incentives. Instead, they rely on improvements in product quality and production efficiencies coupled with rapid infusion of technology to expand their presence in global markets. This highlights that product and process standards are the new trade policy instruments. For example, the negotiating draft of the EU includes many of these regulatory standards. But the FTP 2023 still relies on export incentives. 

The role of the Directorate General of Foreign Trade (DGFT): The DGFT’s primary role would have to be that of a facilitator while the regulatory functions should be reduced with effectiveness. But, FTP 2023 still make the DGFT to continue playing the role of imposing import “prohibitions” or “restrictions”.

Not addressing the weakness of the RoDTEP Scheme: The Rajya Sabha’s Standing Committee on Commerce examined the RoDTEP Scheme and found several weaknesses. The major one was about the rates of remission of duties which were lower than desirable. The FTP has failed to address these lacunae.

Not address the key issues with developing districts as export hubs: The FTP 2023 is missing a commitment to support the critical component of such a programme, namely, efficient infrastructure.

Inclusion of e-commerce might send wrong signals: India has opposed a) WTO discussions on e-commerce for extending the rules of the organisation and b) Data portability demands of advanced economies. But the inclusion of e-commerce in FTP might imply that India is ready to engage in the WTO.