Tag: India’s Foreign Trade Policy

Introduction to India’s Foreign Trade Policy (FTP)

What is the Foreign Trade Policy (FTP) of India?

The Foreign Trade Policy (FTP) of India is a strategic framework formulated by the Government of India to regulate, promote, and facilitate the country’s international trade activities. It sets the guidelines, incentives, and regulatory mechanisms that govern exports and imports, aiming to enhance India’s global trade competitiveness.

Purpose of FTP:

• Boost India’s export potential and global market share
  
• Simplify trade procedures to promote ease of doing business
  
• Provide export promotion schemes and incentives for various sectors
  
• Foster balanced regional development through export hubs
  
• Align India’s trade policies with global standards and agreements
  

Historical Evolution of India’s Foreign Trade Policy

India’s FTP has evolved significantly over decades, reflecting changing economic priorities and global trade environments.

Period	Policy Characteristic	Key Features
Pre-1991	Protectionist and Fixed-Term	Focus on import substitution and limited exports with fixed policy periods.
1991-2015	Liberalization & Fixed 5-Year Plans	Introduction of export incentives and trade liberalization in five-year blocks.
2015-2023	Flexible & Incentive-Based	Focus on export promotion schemes like MEIS and RoSCTL with simplified compliance.
2023 onwards (FTP 2025)	Dynamic, Open-Ended Framework	Shift to continuous, adaptive policies emphasizing digitization, ease of doing business, and sustainability.

This dynamic shift allows the policy to respond swiftly to global market changes and support India’s ambitious export targets.

Role of Directorate General of Foreign Trade (DGFT)

The DGFT, operating under the Ministry of Commerce and Industry, is the primary agency responsible for implementing and monitoring the Foreign Trade Policy.

Key Functions:

• Policy Formulation & Implementation: Drafts FTP guidelines and executes them nationwide.
  
• Licensing Authority: Issues Importer Exporter Codes (IEC), Advance Authorisations, and other trade licenses.
  
• Monitoring & Compliance: Ensures exporters and importers comply with policy regulations.
  
• Facilitating Trade: Provides helpdesk and advisory services for exporters, enabling smooth trade operations.
  
• Digital Platforms: Manages e-governance portals for application processing, reducing turnaround time.
  

DGFT’s proactive digitalization efforts have significantly enhanced transparency and ease of access for trade stakeholders.

Impact of FTP on India’s International Trade and Economic Growth

Since its inception, FTP has been instrumental in shaping India’s trade landscape:

• Export Growth: FTP initiatives have helped increase India’s merchandise exports to over $450 billion in recent years, targeting $2 trillion by 2030.
  
• Diversification: Encouraged exports beyond traditional sectors, including services, e-commerce, and high-value goods.
  
• MSME Empowerment: Provided tailored incentives enabling Micro, Small & Medium Enterprises to enter global markets competitively.
  
• Regional Development: District export hubs and towns of export excellence have promoted inclusive growth.
  
• Foreign Exchange Earnings: FTP policies have strengthened India’s forex reserves and improved trade balance.
  
• Global Trade Integration: Harmonized Indian trade practices with WTO norms and Free Trade Agreements, boosting market access.
  

Overall, the FTP remains a critical policy tool driving India’s ambitions to become a major global trading powerhouse while fostering sustainable economic development.

FTP 2025 Highlights and Key Changes

Transition from FTP 2015-20 and FTP 2023 to FTP 2025

The Foreign Trade Policy (FTP) 2025 marks a significant evolution from the previous fixed-term policies of FTP 2015-20 and the interim FTP 2023. Unlike the earlier time-bound policies, FTP 2025 adopts a dynamic, open-ended framework that allows continuous updates aligned with global trade shifts and domestic economic priorities.

Policy Period	Key Features	Transition Focus
FTP 2015-20	Fixed 5-year policy, export incentives	Emphasis on broad export support
FTP 2023	Interim policy, simplification efforts	Introduction of digital approvals, amnesty schemes
FTP 2025	Dynamic framework, continuous updates	Enhanced digitization, streamlined processes, sustainability focus

This transition supports India’s ambitious export target of $2 trillion by 2030, offering exporters a more flexible and responsive policy environment.

Key Strategic Pillars of FTP 2025

FTP 2025 is structured around four core strategic pillars designed to transform India’s trade ecosystem:

1. Incentive to Remission
   
   • Shifting focus from traditional export incentives to remission of duties and taxes, reducing the cost burden on exporters.
     
   • Implementation of schemes like RoDTEP (Remission of Duties and Taxes on Exported Products) to refund embedded taxes.
     
2. Ease of Doing Business
   
   • Simplifying export-import procedures through automation and digitization.
     
   • Faster clearances with automatic approvals for Advance Authorisation and EPCG schemes.
     
   • Reduced paperwork and streamlined compliance via e-governance platforms.
     
3. Collaboration for Export Promotion
   
   • Strengthening coordination among exporters, state governments, district administrations, and Indian missions abroad.
     
   • Facilitating localized solutions via District Export Hubs and Towns of Export Excellence.
     
4. Focus on Emerging Areas
   
   • Prioritizing growth sectors like e-commerce exports, digital trade, and green/sustainable exports.
     
   • Revamping export controls such as the SCOMET policy to balance trade facilitation and security.

Emphasis on Digitization, Automation, and Transparent Processes

FTP 2025 places digital innovation at its core to enhance transparency and efficiency:

• Digital Portals: Enhanced DGFT online systems for filing licenses, permissions, and tracking applications.
  
• Automation: Automatic approvals for export promotion schemes reduce delays significantly.
  
• Real-Time Monitoring: Dashboards provide exporters with live updates on application status and scheme utilization.
  
• Transparency: Online grievance redressal and policy updates ensure clear communication with stakeholders.
  

This digital shift drastically lowers compliance costs and turnaround times, fostering a more investor-friendly trade environment.

Introduction and Expansion of Key Export Promotion Schemes

FTP 2025 strengthens and broadens export incentive schemes to boost competitiveness:

Scheme	Purpose	Updates in FTP 2025
RoDTEP	Refunds embedded central, state taxes on exports	Expanded product coverage and simplified claims process
Advance Authorisation	Duty-free import of inputs for export production	Automatic approvals, extended validity
EPCG (Export Promotion Capital Goods)	Import capital goods at zero customs duty with export obligations	Faster approvals and increased export obligation flexibility

These schemes are designed to reduce the effective cost of exports, encouraging exporters, especially MSMEs, to scale up production.

Focus on Sustainability and Global Compliance Alignment

Recognizing global trends, FTP 2025 integrates sustainability and compliance:

• Green Exports: Incentives for environmentally sustainable products and technologies.
  
• Global Standards: Alignment with WTO rules, environmental protocols, and labor standards to ensure smooth market access.
  
• Trade Security: Strengthening export controls (e.g., SCOMET) to prevent misuse of sensitive technologies without hindering legitimate trade.
  

This approach positions India as a responsible and competitive player in the global market.

Understanding Indian Exports in 2025

Overview of India’s Major Export Sectors

India’s export basket in 2025 remains diverse, with key sectors driving growth:

• Textiles & Apparel: Largest export contributor, known for cotton, silk, and synthetic fabrics.
  
• Pharmaceuticals: Leading global supplier of generic medicines and vaccines.
  
• Information Technology (IT) & Software Services: Significant export earner in digital products and IT-enabled services.
  
• Agriculture & Food Products: Includes spices, rice, tea, coffee, and processed foods.
  
• Engineering Goods & Chemicals: Machinery, transport equipment, and specialty chemicals.
  

These sectors collectively contribute over 70% of India’s total merchandise exports.

Role of MSMEs and Startups in Boosting Exports

• MSMEs contribute around 40% of India’s exports, especially in textiles, handicrafts, and engineering goods.
  
• Startups drive innovation in digital exports, IT services, and e-commerce exports.
  
• Government export promotion schemes target MSMEs and startups with financial and regulatory support.
  
• Digital platforms and export hubs enable wider market access for small exporters.
  

Impact of Geopolitical Changes and Global Supply Chain Shifts

• Global supply chain disruptions have pushed companies to diversify sourcing from China to India, boosting export opportunities.
  
• Trade tensions and tariffs have prompted India to negotiate new Free Trade Agreements (FTAs).
  
• Geopolitical stability in neighboring regions supports smoother trade corridors.
  
• Emphasis on self-reliance (Atmanirbhar Bharat) balances export growth with domestic manufacturing.
  

Export Promotion Schemes under FTP 2025

Key Export Promotion Schemes

FTP 2025 strengthens India’s export ecosystem through focused schemes designed to lower costs and boost competitiveness.

RoDTEP (Remission of Duties and Taxes on Exported Products)

• Purpose: Refunds embedded central, state, and local taxes not reimbursed under other schemes.
  
• Benefit: Reduces export costs by reimbursing taxes like VAT, electricity duty, and mandi tax.
  
• Recent Update: Expanded product coverage and streamlined claims process for faster refunds.
  

Advance Authorisation Scheme

• Purpose: Allows duty-free import of inputs required for export production.
  
• Benefit: Supports seamless manufacturing by eliminating upfront customs duty on raw materials.
  
• Automation: FTP 2025 enables automatic approvals, reducing processing time.
  

Export Promotion Capital Goods (EPCG) Scheme

• Purpose: Permits import of capital goods at zero customs duty, with mandatory export obligations.
  
• Benefit: Encourages modernization and capacity expansion for exporters.
  
• Recent Reform: More flexible export obligation periods and easier compliance norms.
  

Duty-Free Import Authorisation (DFIA)

• Purpose: Enables duty-free import of inputs used in export goods manufacturing.
  
• Benefit: Helps exporters reduce input costs, improving global price competitiveness.
  
• Application: Linked to export performance and monitored through the DGFT portal.

Note: DFIA scheme is discontinued since FTP 2015-20 and replaced by the Advance Authorisation scheme. Existing DFIA authorisations are still valid until expiry, but new applications are no longer accepted.

District Export Hubs and Towns of Export Excellence

Concept and Objectives of District Export Hubs

District Export Hubs are designated regions focused on boosting exports by leveraging local strengths. The objective is to decentralize export promotion, create infrastructure, and provide targeted support at the district level.

Key Goals:

• Enhance export capacity of local industries
  
• Improve infrastructure and logistics
  
• Foster skill development and innovation
  
• Facilitate access to global markets
  

Identification and Benefits for Districts Designated as Export Hubs

Identification Criteria:

• Export potential and existing trade volumes
  
• Presence of export-oriented industries and clusters
  
• Infrastructure readiness and connectivity
  

Benefits Include:

• Priority government support and funding
  
• Dedicated export facilitation centers
  
• Simplified regulatory processes
  
• Increased market visibility for local exporters
  

Towns of Export Excellence (TEE): Features and Impact

Towns of Export Excellence are smaller urban centers recognized for exceptional export performance in niche sectors.

Features:

• Specialized export products or clusters (e.g., handicrafts, leather, agro-products)
  
• Strong local entrepreneurship and export culture
  
• Access to export promotion schemes
  

Impact:

• Job creation and improved livelihoods
  
• Stimulated local economies through increased trade
  
• Encouraged innovation and quality improvements
  

Contribution to Regional Economic Development and Export Diversification

• Balanced Growth: Helps reduce export concentration in metros by promoting tier-2 and tier-3 regions.
  
• Export Diversification: Encourages new products and markets from different districts.
  
• Inclusive Development: Empowers MSMEs and local entrepreneurs, expanding economic participation.
  
• Infrastructure Boost: Drives investments in transport, warehousing, and technology.

E-commerce Exports: Unlocking New Opportunities

Growth of E-commerce Exports from India

India’s e-commerce export sector is witnessing rapid expansion, driven by:

• Increasing global demand for Indian handicrafts, textiles, electronics, and specialty products
  
• Rise of digital platforms connecting SMEs and artisans directly to international buyers
  
• Growth in cross-border online sales, especially to the US, Europe, and Middle East
  

E-commerce exports contribute significantly to India’s $450+ billion export portfolio and are projected to grow faster than traditional exports.

FTP Provisions and Support for Cross-Border E-commerce

FTP 2025 includes specific measures to promote e-commerce exports:

• Recognition of e-commerce as a key export channel
  
• Simplified export procedures and eligibility for export promotion schemes
  
• Allowance for digital documentation and electronic invoicing under schemes like RoDTEP and Advance Authorisation
  
• Support for startups and MSMEs selling through e-commerce platforms
  

Challenges and Opportunities in Digital Exports

Challenges:

• Compliance with diverse international trade regulations
  
• Complex customs clearance and taxation rules
  
• Logistics and last-mile delivery hurdles
  

Opportunities:

• Access to global consumer markets with low entry barriers
  
• Ability to scale rapidly with minimal infrastructure
  
• Use of technology for marketing, payment, and customer support
  

Government Initiatives to Facilitate E-commerce Exports

• Digital Documentation: DGFT’s online portals enable seamless filing and tracking of export documents.
  
• Simplified Customs Clearance: Faster processing for e-commerce shipments with electronic data interchange (EDI).
  
• Dedicated Export Support: Export facilitation centers offering training, advisory, and export credit access.
  
• Integration with Global Marketplaces: Partnerships promoting Indian products on major international e-commerce platforms.
  

The FTP 2023 Amnesty Scheme: What Exporters Should Know

Purpose and Scope of the Amnesty Scheme

The FTP 2023 Amnesty Scheme was introduced to allow exporters to rectify past discrepancies in export data and documentation without facing heavy penalties. Its key objectives are:

• Encourage compliance and transparency in export reporting
  
• Reduce litigation by offering penalty waivers for genuine errors
  
• Facilitate formalization of export records under FTP norms
  

This scheme applies to errors in export declarations, shipping bills, and related filings for specified past periods.

Eligibility and Application Process

Who is Eligible?

• All exporters with discrepancies or non-compliance in past export filings
  
• Exporters who voluntarily disclose errors before detection by authorities
  

How to Apply:

• Submit an application through the DGFT’s online portal during the amnesty window
  
• Provide supporting documents detailing the discrepancies and corrections
  
• Pay any nominal fees prescribed (if applicable)
  

Timely and accurate disclosure is critical to avail benefits under the scheme.

Benefits of Compliance and Penalty Waivers

• Waiver of Late Fees and Penalties: Exporters can avoid costly fines related to past non-compliance.
  
• Regularization of Export Data: Corrections bring export records in line with FTP requirements.
  
• Improved Exporter Status: Maintains eligibility for export promotion schemes and government benefits.
  
• Reduced Legal Risks: Limits chances of prosecution or adverse regulatory action.
  

How the Amnesty Scheme Encourages Formalization of Export Data

• Promotes a culture of voluntary compliance and data accuracy among exporters.
  
• Enhances reliability of export statistics for policymaking and trade facilitation.
  
• Strengthens exporter confidence in government procedures by offering a one-time relief.
  
• Supports the broader FTP goal of ease of doing business through simplified compliance.

India Rupee Internationalization and Its Impact on Trade

Concept of Rupee Internationalization in Trade Settlements

Rupee internationalization refers to using the Indian rupee (INR) for settling cross-border trade transactions instead of foreign currencies like the US dollar. This shift aims to:

• Enhance the global acceptability of the rupee
  
• Facilitate smoother trade settlements with trading partners
  
• Reduce dependency on dollar-based transactions
  

Benefits for Exporters and Importers

• Reduced Currency Conversion Costs: Direct INR settlements eliminate multiple forex conversions, lowering transaction fees.
  
• Minimized Forex Volatility Risk: Settling in rupees shields businesses from foreign exchange rate fluctuations.
  
• Simplified Payment Processes: Faster and more transparent settlements enhance cash flow management.
  
• Improved Bilateral Trade Relations: Strengthens economic ties with key trade partners adopting INR settlements.
  

Recent Developments in Rupee-Based Trade with Key Partners

• India has expanded rupee trade settlement agreements with countries including:
  
  • Russia (Energy imports)
    
  • United Arab Emirates
    
  • Sri Lanka
    
  • Iran
    
• Central banks of these countries facilitate INR clearing, encouraging wider adoption.
  
• RBI continues to promote rupee invoicing through regulatory support and banking channels.
  

Impact on Forex Risk and Transaction Costs

Impact Area	Before Rupee Settlement	After Rupee Settlement
Forex Risk Exposure	High, due to fluctuating USD/INR and other currency pairs	Significantly reduced, as trade settles in INR
Transaction Costs	Higher due to multiple conversions and intermediaries	Lower, direct INR settlement reduces fees
Settlement Time	Longer due to complex currency exchange routes	Faster due to simplified payment mechanisms

Rupee internationalization strengthens India’s position in global trade by making transactions cost-effective and less risky for exporters and importers.

Overview of SCOMET Policy under FTP 2025

What is SCOMET Policy?

SCOMET stands for Special Chemicals, Organisms, Materials, Equipment, and Technologies. It is a regulatory framework controlling the export of sensitive items that could have military, strategic, or dual-use applications. The SCOMET policy aims to prevent misuse while facilitating legitimate trade.

Regulatory Framework and Export Control List

• Managed by the Directorate General of Foreign Trade (DGFT) under the Ministry of Commerce.
  
• Includes a detailed Export Control List (ECL) categorizing items into various groups based on sensitivity.
  
• Requires exporters to obtain special licenses or permissions before exporting SCOMET-listed goods.
  
• Aligns with international non-proliferation treaties and export control regimes.
  

Changes Under FTP 2025 Related to SCOMET

• Enhanced clarity on licensing procedures with digitized application processes.
  
• Updated Export Control List reflecting technological advancements and emerging risks.
  
• Streamlined compliance to balance export facilitation and national security concerns.
  
• Increased coordination with customs and security agencies for enforcement.
  

Compliance Requirements for Exporters Dealing in SCOMET Items

• Mandatory registration and licensing before export.
  
• Detailed documentation including End-User Certificates (EUC) and declarations.
  
• Adherence to export limits and restrictions specified in the FTP and ECL.
  
• Regular audits and reporting to DGFT as per policy mandates.
  
• Non-compliance can lead to penalties, license cancellations, or legal action.