Overview of India’s Foreign Trade Policy (FTP)

International trade forms the backbone of any growing economy, and India is no exception. The Foreign Trade Policy (FTP) serves as the guiding framework that shapes how India engages with global markets, facilitates exports, and manages imports. Understanding this policy is essential for businesses, exporters, and anyone involved in the food processing or manufacturing sectors looking to tap into international opportunities.

What is the Foreign Trade Policy? 🔗

The Foreign Trade Policy is a comprehensive document that establishes guidelines for India’s import and export activities. It outlines schemes, incentives, and procedures designed to boost the country’s trade performance while ensuring compliance with international standards. The current iteration, FTP 2023, was launched on March 31, 2023, marking a significant shift from previous five-year policies to a more dynamic, open-ended approach.

The policy operates under the legal authority of the Foreign Trade (Development and Regulation) Act, 1992, commonly known as the FTDR Act. This legislation replaced the Import and Export (Control) Act of 1947, reflecting India’s move toward economic liberalization. The FTDR Act grants the Central Government comprehensive powers to formulate trade policies, regulate imports and exports, and implement mechanisms that support India’s integration into the global economy.

The legal foundation: FTDR Act 1992 🔗

The Foreign Trade (Development and Regulation) Act was enacted on August 7, 1992, with the primary purpose of facilitating imports into India and augmenting exports. This legislation provides the statutory basis for all foreign trade policies and empowers the Directorate General of Foreign Trade (DGFT) to administer trade regulations.

Key provisions of the FTDR Act 🔗

Section 3 of the Act empowers the Central Government to make provisions for development and regulation of foreign trade, including the power to prohibit, restrict, or otherwise regulate imports and exports. Section 5 authorizes the government to formulate and announce the Foreign Trade Policy, which can be amended through notifications in the official gazette as circumstances require.

Under this Act, no person can conduct import or export business without obtaining an Importer-Exporter Code (IEC) number from the DGFT. The legislation also establishes the framework for export promotion schemes, duty exemptions, and penalties for violations of trade regulations.

Core objectives of FTP 2023 🔗

The primary goal of FTP 2023 is to achieve US$2 trillion in exports by 2030, with equal contributions expected from merchandise and services sectors. This ambitious target represents a significant scaling up from India’s export performance of approximately US$760-770 billion in fiscal year 2022-23.

The policy aims to transform India’s approach to trade promotion by shifting from an incentive-based regime to one focused on remission and entitlement. This means moving away from traditional export incentives toward a more facilitative framework that reduces transaction costs and simplifies procedures for exporters.

The four pillars of FTP 2023 🔗

The policy rests on four foundational pillars: incentive to remission, export promotion through collaboration, ease of doing business with reduced transaction costs, and focus on emerging areas. These pillars guide all initiatives and schemes under the policy framework.

The collaborative approach brings together exporters, state governments, district administrations, and Indian missions abroad to work as partners in achieving export targets. This represents a departure from centralized policy implementation toward a more participatory model.

Strategies for boosting exports 🔗

FTP 2023 introduces several strategic initiatives designed to enhance India’s export competitiveness and expand market access.

Districts as Export Hubs 🔗

The Districts as Export Hubs (DEH) initiative promotes exports at the grassroots level by identifying export-worthy products and services in each district. State Export Promotion Committees and District Export Promotion Committees work together to prepare district-specific export action plans that outline strategies tailored to local strengths and capabilities.

This decentralized approach ensures that artisans, small manufacturers, and agricultural producers in remote areas can participate in international trade. Each district develops its export ecosystem with appropriate logistics, testing facilities, and connectivity infrastructure.

Towns of Export Excellence 🔗

FTP 2023 designated four new Towns of Export Excellence: Faridabad for apparel, Moradabad for handicrafts, Mirzapur for handmade carpets and dari, and Varanasi for handloom and handicraft products. These additions bring the total number of recognized TEEs to 43 across the country.

Towns with this designation receive priority access to export promotion funds and can avail benefits under the Common Service Provider scheme of the Export Promotion Capital Goods (EPCG) program.

Process simplification and automation 🔗

The policy emphasizes process re-engineering through automated IT systems with risk management frameworks. This reduces the need for manual interface and enables faster approvals for exporters. Applications that previously took several days to process can now receive same-day approval through the automatic route.

Reduced costs for MSMEs 🔗

Micro, small, and medium enterprises benefit significantly from reduced user charges under the Advance Authorization and EPCG schemes. This reduction benefits approximately 55-60 percent of exporters who fall under the MSME category. Fee structures have been simplified to make export benefits more accessible to smaller businesses.

The entire authorization lifecycle, from application to redemption, operates in a paperless environment, eliminating documentation burdens that previously discouraged small exporters from participating in international trade.

E-commerce and digital trade 🔗

E-commerce exports present potential worth US$200-300 billion by 2030. Recognizing this opportunity, FTP 2023 extends all policy benefits to e-commerce exports and establishes a roadmap for creating e-commerce hubs with warehousing facilities.

The consignment-wise cap for e-commerce exports through courier has been raised from ₹5 lakh to ₹10 lakh. The policy also envisions operationalizing Dak Ghar Niryat Kendras (postal export centers) throughout the country to help artisans, weavers, and craftsmen in remote areas access global markets through a hub-and-spoke model.

Key export promotion schemes 🔗

Several established schemes continue under FTP 2023 with enhancements to make them more effective.

Advance Authorization Scheme 🔗

This scheme allows duty-free import of raw materials required for manufacturing export products. The quantity of inputs permitted is based on specific norms defined by DGFT, considering wastage generated during production. The Special Advance Authorization Scheme has been extended to the apparel and clothing sector to facilitate prompt execution of export orders.

Export Promotion Capital Goods Scheme 🔗

The EPCG Scheme permits import of capital goods at zero customs duty for export production. Recent additions include the dairy sector’s exemption from maintaining average export obligations, enabling technology upgrades. Green technology products like battery electric vehicles, vertical farming equipment, and green hydrogen now qualify for reduced export obligation requirements.

Internationalization of the rupee 🔗

FTP 2023 supports international trade settlement in Indian rupees through special Vostro accounts established per Reserve Bank of India guidelines. This initiative aims to reduce dependence on foreign currencies and position the rupee as a viable option for global trade transactions.

Amnesty Scheme for exporters 🔗

To address historical compliance issues, the policy introduced a one-time Amnesty Scheme for exporters who defaulted on export obligations under EPCG and Advance Authorization. This scheme allows regularization of pending cases by paying customs duties exempted in proportion to unfulfilled obligations, with interest capped at 100 percent of such duties. This provides relief to exporters burdened by accumulated duties and interest costs from pending cases.

Infrastructure and compliance focus 🔗

The policy addresses infrastructure and logistics bottlenecks that have historically hindered export growth. Districts are encouraged to develop testing facilities, improve connectivity, and establish export-oriented systems by leveraging various ongoing government schemes.

India’s integration with export control regime countries continues to strengthen under FTP 2023. The SCOMET (Special Chemicals, Organisms, Materials, Equipment and Technologies) framework has been streamlined to ensure compliance with international treaties while facilitating exports of dual-use technologies.

Looking ahead 🔗

Unlike previous policies with fixed five-year durations, FTP 2023 operates as a living document that can be amended based on feedback from trade and industry stakeholders. This dynamic approach allows the policy to respond quickly to changing global trade conditions and emerging opportunities. The consultative mechanism ensures that sectors feeling underserved by current provisions have recourse for their concerns.

For food businesses, manufacturers, and exporters, understanding the FTP framework opens doors to duty exemptions, simplified procedures, and support mechanisms that can significantly enhance competitiveness in international markets.

What do you think? How might the shift from incentive-based support to a facilitation-focused approach change the landscape for small and medium exporters in your industry? What infrastructure improvements would most benefit export growth in your region?

References

1. https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=1912572
2. https://blog.ipleaders.in/foreign-trade-policy/
3. https://www.indiacode.nic.in/bitstream/123456789/1947/3/A1992-22.pdf
4. https://www.centaxonline.com/blog/foreign-trade-development-and-regulation-act-evolution-regulations-administration
5. https://www.india-briefing.com/news/indias-new-foreign-trade-policy-2023-in-effect-from-april-1-key-points-27582.html/
6. https://www.epw.in/journal/2023/40/commentary/foreign-trade-policy-2023.html
7. https://www.investindia.gov.in/team-india-blogs/indias-foreign-trade-policy-2023-roadmap-boost-exports