NEW FOREIGN TRADE POLICY OF INDIA (2021-26) & OTHER RELATED SCHEMES

Introduction

Every sovereign state has to do some kind of foreign trade (exchange of goods and services between different countries in form of imports and exports). Therefore it becomes important for a country to make a policy to regulate the same. In India Foreign trade (development & regulation) Act, 1992 was enacted for regulating imports and exports after the implementation of a new economic policy that brought Liberalisation, Privatisation, and Globalization. According to the act, the government is authorized to announce foreign trade policy for achieving certain objectives related to foreign trade. This policy is commonly known as the Exim policy (export-import policy). The long term objectives of foreign trade policy are: simplifying business procedures, reducing transaction costs, facilitating trade services, updating infrastructure, etc.[1]

Features of Indian foreign trade policy

After every five years, India makes amendments to its foreign trade policy. The commerce ministry is responsible for announcing new foreign trade policy. The current foreign trade policy is for the period 2015-20. Usually, foreign trade policy is announced on the 31st of March and comes into effect from 1st April. But due to the COVID pandemic, the last foreign trade policy was extended for a year i.e. up to 31^st March 2021.

Therefore, Union Commerce Minister, Piyush Goyal has recently announced the new foreign trade policy of India for the period of 2021-26, which will be implemented from 1^st April, 2021. The main aim of the new policy is to make India, a leader in international trade.

Key provisions of the foreign trade policy 2021-26:

The policy aims to make India, an economy of USD 5 trillion, by the year 2024. This is to be done by increasing exports in both services and merchandise sectors.
The policy tries to address various overseas and domestic obstacles to enhance ease of doing business and reduce transaction costs.
The infrastructure is to be developed to create a low-cost operating environment.
District hub export initiative: This scheme will be implemented in a phased manner by the commerce department through regional authorities of DGFT (Directorate General of Foreign Trade) to make each district of India, an export hub.
To correct the trade imbalance in India, the domestic services and manufacturing sectors will be improvised with the infrastructure support of the government.
Meetings will be held with industry associations like FICCI (Federation of Indian Chamber of Commerce and Industry), chambers of commerce, export promotion councils, and state government to take their views.[2]

Comparison with previous foreign trade policy (2015-2020)

Although the long-term objective of increasing exports remains the same in both the policies, the components by which this objective is to be achieved differs. The foreign trade policy for a period of 2015-20 was aimed at ‘Make in India’ while the new policy aims to boost exports at the district level. ‘Merchandise export from India scheme’ was the main scheme in 2015 foreign trade policy to boost exports. Other schemes included the Authorised Economic Operators scheme for clearing customs in both India and foreign countries, creation of a new logistic division and national logistics information portal, etc. [3]

Challenges that should be overcome for successful results of new foreign trade policy:

Unemployment and under-employment: For a successful foreign trade policy it is very important to address the issue of unemployment and under-employment, only then this Exim policy can bring positive returns.
Agriculture: It is often seen that while promoting trade agriculture sector gets neglected. Therefore it is important to balance the two.
Funding issues: The highly optimistic targets and policies of India could only be achieved if adequate funds are provided for it. Lack of funds must not become a hurdle in achieving USD 5 trillion economy.
Infrastructure development: The policy gives priority to infrastructure but it must not remain on paper only. An actual infrastructure is a must for development. [4]

Other key initiatives in field of trade and infrastructure:

Payment infrastructure development fund (PIDF) by RBI: To boost digital payments, the central bank has formed an advisory council under B.P.Kanungo to plan a transparent mechanism for the digitalization of the payment system. This will enhance point of sale infrastructure and reduce cash demand.
Startup India seed fund scheme: A scheme of Rs. 945 crore for providing financial assistance to startups is launched by DPIIT (Department for Promotion of Industry and Internal Trade). A startup with a viable business idea has not received monetary support of more than 10 lakh and started not before 2 years can get funds through selected incubators spread across the country. It is expected to promote trade and innovation in India that could boost foreign trade of India.
Prarambh startup India International Summit: DPIIT and Commerce ministry organized a world level discussion on innovation, technologies, and other topics. The main objective was to grab the international attention towards Indian startups and promote foreign investments that could boost Indian trade. [5]

Conclusion

The foreign trade policy of a country is an important highlighter of trade-related objectives of the Government. The year 2020 had brought negative growth for India. Due to the pandemic, the whole country was in lockdown and the trade in the country became minimal. Foreign trade reduced drastically. Therefore it became important for the government to bring a new foreign trade policy for boosting exports. The government is trying to revive the economy with different schemes. But the implementation of the schemes will remain an issue to look upon because if a scheme is not implemented properly then, even a good scheme will fail to bring the desired change. Other impediments like unemployment, lack of infrastructure, etc. also need attention for boosting foreign trade. With the economic survey being published and the annual budget presented, everyone is optimistic about growth and V-shaped recovery. IMF has also projected double-digit growth for India (11.5%). Therefore it becomes very important for the government to stand upon everyone’s expectations, overcome all the lacunae and establish India as a global leader in international trade. Only then, we can expect that India will raise its GDP chart and make itself a USD 5 Trillion economy.

[1] Meaning of foreign trade policy (slideshare.net)

[2] India set to implement New Foreign Trade Policy 2021-26 from April 1, 2021 (affairscloud.com)

[3] Highlights & Procedure of Foreign Trade Policy – 30 Jan 2021 (bankbazaar.com)

[4] New Foreign Trade Policy – GKToday

[5] www.gktoday.in/currentaffairs