India's New Foreign Trade Policy-2024

 

India's New Foreign Trade Policy-2024

India's New Foreign Trade Policy-2024

 

India's new and much-awaited Foreign Trade Policy (FTP), unveiled by Union Commerce & Industry Minister Mr. Piyush Goyal on March 31, 2023 in New Delhi, is a significant deviation from its predecessors. The new FTP is innovative and different from the earlier ones. While earlier FTPs launched new schemes and incentives, the new one tries to move away from an incentives- based regime towards creating an enabling ecosystem for Indian exporters. It sets an ambitious target of $2 trillion exports by 2030, a big jump from the current level of $760 billion and focusses on international trade settlement in Indian Rupee. Another feature is that the new FTP is a dynamic policy. It has been kept open to accommodate the emerging need of the time. Earlier, the FTPs generally were used to be for five years. The previous one was the FTP 2015-20 which was to end in March 2020. However, it had to be extended because of the Covid-19 pandemic and volatile geopolitical scenario and hence continued till the end of March 2023 before the new FTP came into effect on April 1, 2023.

 

Organization's (WTO) Agreement on Subsidies and Countervailing Measures (ASCM). India lost the case at the WTO in 2019 and had to withdraw these subsidies or replace them with WTO- compliant supports like the Remission of Duties and Taxes on Export Products (RODTEP) scheme, which replaced the previous Merchandise Exports from India Scheme (MEIS). In light of these developments, there has been a shift in the new FTP from announcing new subsidies to focussing on the ease of doing business and facilitating the integration of Indian Small and Medium Enterprises (SMEs) with global value chains.

 

Four Pillars

 

The new FTP 2023 aims to provide policy continuity and a responsive policy framework for promoting India's exports of goods and services, according to Directorate General for Foreign Trade (DGFT) notification. The key approach to the policy is based on 4 pillars, namely:

 

(i)           Incentive to Remission;

(ii)               Export promotion through collaboration-Exporters, States, Districts, Indian Missions;

(iii)             Ease of doing business, reduction in transaction cost and e-initiatives; and

(iv)             Emerging Areas-E-Commerce Developing

 

Districts as Export Hubs and streamlining the Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) policy.

has been allowed under the new FTP 2023 and changes introduced for the grant of export benefits and fulfilment of export obligation for export realisations in Indian currency as per RBI norms. The government has been working towards making the Indian Rupee a global currency and allowing international trade settlement. In 2021, the RBI had put in place an additional arrangement for invoicing, payment and settlement of exports/imports in Indian currency. This mechanism will help in internationalising the Indian currency in the long run. A currency can be termed "international" if it is widely accepted worldwide as a medium of exchange.

 

The FTP 2023 aims at process re- engineering and automation to facilitate ease of doing business for exporters. It also focusses on emerging areas like dual use high end technology items under SCOMET, facilitating e-commerce export and collaborating with States and districts for export promotion. The new FTP introduces It is not without reason that the far- reaching changes have been made into India's Foreign Trade Policy 2023. The FTP is a legal document, issued by the Government of India, enforceable under the Foreign Trade Development and Regulation Act, 1992. The FTP has been the guiding beacon for all stakeholders. The prime objective of an FTP is to facilitate trade by reducing transaction and transit costs and time. An FTP sets out the regulations for cross-border trade and reveals the government's position on a host of concomitant yet crucial policy variables such as technology flow, intangibles and so on. Moreover, it is essential to clarify India's position and alignment with flagship programmes like Local for Global and Production Linked Incentive (PLI) schemes, the Special Economic Zone (SEZ) scheme, changing geographical profiles of India's export basket and implications of the Free Trade Agreements. It is pertinent to note that a number of our export-linked subsidies- some offered under the previous FTP 2015-20 were challenged by the United States of America as prohibited subsidies under the World Trade

 

 

Towns of Export Excellence (TEES):

 

Four new towns-Faridabad, Mirzapur, Moradabad and Varanasi- have been designated as Towns of Export Excellence (TEES) in addition to the existing 39 towns. The TEES will have priority access to export promotion funds under the MAI scheme and will be able to avail Common Service Provider (CSP) benefits for export fulfilment under the EPCG scheme. This addition is expected to boost the exports of handlooms, handicrafts and carpets of Recognition Exporters: Exporting firms recognised with 'status' based on export performance will now be partners in capacity-building initiatives on a best-endeavour basis. Similar to the 'Each One Teach One' initiative, 2-star and above status holders would be encouraged to provide trade- related training based on a model curriculum to interested individuals. This will help India build a skilled manpower pool capable of servicing a $5 trillion economy before 2030. Status recognition norms have been re-calibrated to enable more exporting firms to achieve 4 and 5-star ratings, leading to better branding opportunities in export markets.

 

one-time Amnesty Scheme for exporters to close the old pending authorisations and start afresh. It also encourages recognition of new towns through "Towns of Export Excellence Scheme" and exporters through "Status Holder Scheme". The FTP 2023 aims at facilitating exports by streamlining the popular Advance Authorisation and EPCG schemes, and enabling merchanting trade from India. Let us look into the features of FTP 2023 in some detail.

 

International Trade in Rupee:

 

International trade settlement in Rupee

 

Promoting Exports from Districts:

 

The FTP 2023 aims at building partnerships with State governments and taking forward the Districts as Export Hubs (DEHS) initiative to promote exports at the district level and accelerate the development of grassroots trade ecosystem. Efforts to identify export- worthy products & services and resolve concerns at the district level will be made through an institutional mechanism- State Export Promotion Committee .

 

Seat-Rotation Provision:

 

The Act provides for the rotation of seats reserved for women, which shall take effect after each subsequent delimitation exercise, as the Parliament may determine by law.

 

Important Omissions:

 

The Act has no provision for reservation in the Rajya Sabha, the Upper House, and State Legislative Councils. There is no reservation for Other Backward Classes (OBC) women as there is reservation for OBC men either in Lok Sabha or State Legislative Assemblies.

 

Women celebrate Women's Reservation Bill becoming an Act on September 26, 2023.

 

With India's abysmally poor record in women's representation in Parliament and State Legislatures, this Act has been waiting to see the light of the day for nearly three decades. In the World Economic Forum's Global Gender Gap Index, which maps the gender gap in countries across four dimensions-economic opportunities, education, health and political leadership-India has consistently ranked below 100 out of nearly 150 countries. Meanwhile, based on data from the Inter-Parliamentary Union, India's ranking in women's representation stands at 148th out of 193 countries. This ranking is in comparison to the global average of 26.5%. India has been repeatedly classified as a flawed democracy in the Global Democracy Indexes, and the abysmal representation of women has been one of the main reasons.

 

Without any statutory quota, the share of women MPs in the Lok Sabha could only rise from 4% in 1952 to nearly 15% in the 17th Lok Sabha elected in 2019. The share is similar in the Upper House. In State Legislative Assemblies, women represent an abysmally low average of 9% of the total members, with the situation really pathetic in 19 States. Women's representation in State Legislatures varies from a mere 3.1% in Nagaland to a relatively higher 23.1% in Bihar. All this is despite the sharp rise in political awareness among women courtesy of the 33% reservation introduced in Panchayati Raj institutions in 1993. Their share in local bodies is up to 50% in 21 States.

 

With the new Act, India will join the select club of 40 nations, including neighbours Pakistan, Bangladesh, Nepal and China, that have reserved seats for women in legislative bodies. Both international and domestic empirical evidence strongly indicates that gender reservations play a crucial role in facilitating women's political involvement. As evidenced by the Gender Quotas Database, some or other kinds of electoral quotas are implemented in over 130 nations. The Database also indicates that 21 out of 25 countries boasting parliamentary representation for women exceeding 40% have adopted various types of gender quotas. Research conducted in several countries, including Rwanda, Argentina, Mexico and Nigeria, has shown that women in positions of power tend to prioritise the interests and concerns of women to a greater extent. The Delimitation Imbroglio The women's reservation mandated by the new Act will kick in only after the completion of the delimitation exercise based on the first Census to be conducted after its passage.

 

The delimitation exercise, as mandated by Article 170 of the Constitution and the Representation of the People Act of 1950, redraws the boundaries of the legislative constituencies to reflect population changes. It also reworks the number of seats reserved for SC/STs, as provided by Articles 330 and 332 of the Constitution. The Constitution mandates that such delimitation be conducted after every Census. Four such exercises were conducted till 1976. However, population-based delimitation meant that states with high population growth, mainly in north India, had more seats in Parliament. To allay the fears of unequal political representation expressed by the developed States, the Constitution was amended in 1976 to suspend delimitation until 2001. Another amendment in 2001 postponed it by 25 years, to be done based on the first Census after 2026.

 

That first Census after 2026 would be conducted in 2031.

 

However, since the Covid-19 pandemic put paid to the 2021 exercise, the Union Government may well decide to conduct the population count after 2026. That could pave the way for delimitation, and the Women's Reservation Act could be implemented by 2029. Political observers, however, caution that this is easier said than done. In 2002, when a new Delimitation Act was passed to redraw the existing number of Parliamentary/Assembly constituencies based on the 2001 Census, it took nearly two and a half years to make delimitation data available to the Delimitation Commission, which conducts the exercise. The next delimitation effort may have to face legal challenges too, particularly from the southern states where better education and health indices may have resulted in healthy rates of population growth, but which puts them at a demographic disadvantage vis-a-vis the northern states. All this puts a cloud of uncertainty over the implementation of the women's reservation. Most possibly, the 2029 general elections might be held with 33% of seats reserved for and the aspiring women representatives will have ample women. In that case, political parties, society in general, time to prepare for the big change.

 

Conclusion

 

The Nari Shakti Vandan Adhinyam 2023 is a critical piece of legislation that seeks to enhance women's involvement and representation in national decision-making bodies. Significantly, it has the potential to usher in a new era of gender equality and political empowerment in Indian politics, transforming the socio-political landscape into a balanced, diverse, and inclusive space. There is also another significant change that the new Act could usher in. An April 2023 report by the McKinsey Global Institute estimated that India could add up to $770 billion, or more than 18%, to its Gross Domestic Product (GDP) by 2025 if it gave its women equal opportunities. Currently, women's contribution to the country's GDP is just 18%, among the lowest in the world, with only 25% of India's labour force being female. CSR