Foreign Trade Policy of India – Why Delay?

So basically, if we talk about the foreign trade policy, it is very, very important to understand first that what are the basic concepts and the roles of these different foreign policies which are actually framed by our country, that is India. So every country has their foreign trade policy and they have roles, as I had just already mentioned, in the economic development and the generation of employment and many things.

So main role, if we talk about, starts with the fact that these foreign trade policies promote trade and commerce. Definitely. And that is the core objective of any FT policy, including that of India.

And second very important part is to target the achievement of some of the required objectives based on the different types of areas of concern for a particular country. For example, if we talk about the Indian context, the concern of generating employment, for example, this is one of the concern which is I wouldn’t say that other countries do not have these concerns, but India being a very large country, very populous country, employment generation remains very, very important socially as well as politically, these kind of concerns.

Every country have their are different types of concerns and those concerns have to be targeted. So, for example, I’ll give you another example. Right now, as you can see there, that Sri Lanka is passing through very difficult times and one of the reason for Sri Lanka to face the type of situation which it is facing right now is also because being a smaller country, they had been dependent on many essential items from overseas, for example, basic medicines in Sri Lanka. They are dependent on other countries. Now. If they are dependent on other countries for these kind of essential items, they need foreign exchange. At the moment, the BoP position is not good and they were sitting on this time bombe. And what we are seeing today is that the problem is there. So probably their foreign trade policy had not targeted this very real concern that the dependency of the country on small, small, essential things like pharmaceutical or the medical equipment. on foreign countries. So probably they were busy with many other areas and they never thought of the fact that the BoP Position can go haywire, which actually has happened. So similar situation can happen to those countries which are failing to target their areas of concern in these kind of FT policies.

So the fact remains that these foreign trade policies are formulated not in a same way like I wouldn’t say that the US FT policy is very similar to India, no. Their concern areas are different. Their structure may be similar, but the focus will be different. So it is in line with the changing socio economic environment of any country. So if we talk of India, we are talking of the foreign trade policy in tune with the current as well as the changing socioeconomic environment. And for this reason, to be able to do that. It is revised every five years. So this overview I wanted to share with you.

My aim was simply to drive upon to you the real things, which goes in the mind of the people who frame these policies, whether it’s the Department of Commerce or the people who give feedback to Department of Commerce, the agencies like EPCs, Export Promotion Councils or traders, or even the political people like MPs and the States. The States are the major partner of the FT policy of the central government. So they have their own concerns, actually. Their local concerns. So those has to be part of the FT policy. So it’s a very complicated thing. It’s not very easy to frame the foreign policy of any country. Including that of India. And probably that is the reason it is taking time for the Government of India to come out with the new policy which was stated to be there in 2020 itself. But it has still not been ratified for these kind of reasons. Now the FT policies in the past. If we talk about, these were based on these concerns only in their own way of that time, what the socioeconomic environment was there at the time and what changes were taking place. For example, after 1991, after the adoption of LPG- liberation, privatization and globalization. And how country changed with the time year by year or the policy by policy. So going forward FT policy of 2015-20, which was the baby of the new government. So under the fact that this new government had very different approach to the economic development of the country from the past governments, Definitely.

That difference was reflected in this FT policy 2015-20, which specifically focused on increasing the market share of India in the global trade. So. I just wanted to share with you that the share of India’s export efforts in the global market is approximately 2%, which actually is not a very good figure. If we talk of India, as a very large country and India aspiring to become a global player in the foreign trade, this figure of 2% is not really very commendable. So probably this was the reason that a major focus of this foreign trade policy was how to increase the market share of the India’s foreign trade in the overall global business, and also to include new products in the export basket by incentivising exports and having some focus areas in the overall basket so that the items which are exported traditionally, they do not take the burden of the goals which the country have. It’s not possible because 70% of the India’s export items, they only account for the 30% requirement of the world. So this is not a very good figure. So what the meaning of this that the majority of the products which India exports, they do not really fulfill the overall requirement of the world. So as I told you it serves only 30%. So there is a scope of adding new products. Probably they are manufactured in India, probably they are imported. Probably India doesn’t have the technology to make that. Probably the traders in India, they do not have the money to invest in those kind of production of those items. So, for example, many of the items we had been totally dependent on the international market. Even till very recently. Talk about the mobile phones, talk about the laptops and many items which we were happy with imports and had probably not thought of any major investment by the government or the private sector. So probably that was the reason that the product basket of our exports was not able to really feed the world trade. to the requirements. What is required in the market? So why we have not been manufacturing those goods, so that was stressed in the foreign trade policy of 2015-20.

But what happened with this approach? It was done in very good intention of the government to really benefit the country. And in this what has happened that government has incentivised with very bold steps like providing the duty free scrip in the form of so-called MEIS scheme or the SEIS scheme which I will just talk about. But what has happened that the World Trade Organisation ruling against the incentive schemes like MEIS and SEIS, which was based on the complaint by U.S. about the schemes of this policy, that is the foreign trade policy 2015-20 and especially the MEIS scheme, derailed the objectives.

So these objectives could not be fulfilled because of this major setback which the foreign trade policy and the country faced because World Trade Organization ruled that India is subsidizing the exports and India is not eligible for subsidy. So I’ll just talk about it. Why WTO thought that India is not eligible to subsidize its exports? So, you know, this is just the, again, overview of the foreign trade policy 2015-20 which is still in effect and it has been extended for almost two years for certain reasons, which I’ll just discuss that. what are the reasons why it has been extended and new policy is still to come. So this is just I wanted to talk about the little overview of the foreign trade policy 2015-20. And as we know, the new policy, which is foreign trade policy of 2021-26 is on the anvil and it is expected to be more inclusive.

So the question here comes that how do we know that the 2021-26 will be of this type? So let me tell you, the FT policies are not like any budget. Declaration or the passing of the budget, which normally is kept secret. That is not the case. So foreign policy, of 2021-26. is not a secret. It is circulating already among the political people, among the different agencies like EPCs, Commodity Boards chambers of commerce, industry bodies, exporters and all the stakeholders. This policy is already circulating, and their feedback and their concerns on the policy document have been invited. They have been already logged in. So this policy is already there in the market. We already know the main proposals which are proposed in this policy. So it is likely to be more inclusive and it is likely to address the very important things which were ignored in the foreign trade policy. That is FTP 2015-20, that is addressing the skill development and the technology upgradation issues, without which even the objective of adding new products in the export market is not possible without the availability of the skills, the skilled people and the right technology and the possibility of manufacturing new items more competitively in competition with the best manufacturers in the world. We really cannot achieve those objectives which were talked about in 2015-20 policy. So probably that was a major failure of the. The last policy, which is still currently in use. So this is the reason that these two expectations are very real and my idea is just to give you an overview. to start with about 2021-26 policy. We will have a detailed analysis also in this session, in later slides.

So it is just my idea is you know, to share this overview just to make you. Understand the the transition from FTP 2015-20 to FTP 2021-26. So with this overview you’ll have a fairly good idea that what we are talking about? where we are moving? what we are facing actually?

The people at large, not many of them do not even know what actually happened at WTO in 2015-20, and probably as a person from international business, I feel it was a major failure of the current government that they face this kind of situation at WTO. It was not not a very good thing and very unprofessional. Actually, I would say that India had to face this kind of situation at WTO and people don’t know about it. Many people don’t even talk about it. So these few things which are there, and I’m sure the government will not repeat such unprofessional policy making this time. So this is what is happening. And there may be different reasons for the government, new government to think on those lines without even realizing that India was not eligible for those kind of schemes.

Probably this is the background, which is keeping the FT Policy 2021-26 still not being ratified. It is a cautious approach by GOI. They probably want new policy to deliver the expectation more radically and in a useful manner.

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1 thought on “Foreign Trade Policy of India – Why Delay?”

  1. The scheme for providing transport marketing assistance on the specified Agricultural productsais further extended for one year.
    Validity period for making imports under various duty free import authorizations has been allowed automatic extension for another six months from the date of expiry, without requirement of obtaining such endorsement on these authorizations.
    Where ever the period to make export is expiring under various authorizations, automatic extension in the export obligation period is allowed for another six months from the date of expiry without payment of any composition fee.

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