The Foreign Trade Policy of India was established to make the country an important player in the international trade market. It offers a substructure or a blueprint to promote the export businesses, increase the employment opportunities and value addition in the country. With Foreign Trade Policy 2021-26, the government of India is focusing on providing support to important sectors like manufacturing and services. Let’s take a detailed look into the benefits of FTP 2021.
FTP aims at making India a five trillion dollar economy by the end of 2025.
Foreign Trade Policy of India 2021-26 — Overview
The Ministry of Commerce and Industry announced this new trade policy during the Parliament Consultative Committee meeting of the Commerce industry.
For those who don’t know, the Foreign Trade Policy of India is formulated for five years. Earlier, the FTP 2015-20 was established on the 1st of April 2015 and was about to stay in action for five years. However, due to the novel Coronavirus outbreak, this policy was extended by another year till March 31, 2021.
Now, the new FTP has been introduced from 1 April 2021 for the next five years. It aims at making India a major player in the area of global trade and is focused on the goal of making our country a $5 trillion economy. This will be done by fueling the exports – both services and manufacturing.
FTP 2021 will address all the domestic and foreign constraints that are related to regulatory and operational framework, policy for reducing transactional cost and enhance the ease of doing export businesses, in a systematic manner. It also aims at creating a cost-effective and efficient environment with adequate utilities infrastructure and logistics.
Significance of the Foreign Trade Policy of India 2021-26
Foreign Trade Policy of India targets correcting the imbalances within the country. This will be done by improving operations of the local manufacturing and service sectors by providing enough infrastructure and utility support.
Further, the employment opportunities will be increased by channelizing the collaboration earned through service and merchandise exports.
Export Import (EXIM) Policy of India
The main objective of the new FTP is to increase sales to $900 billion. It offers a structured framework for enhancing the export of goods and services as well as Boosting the employment generation. All of these objectives fall in line with the concepts like “Make in India” and “Digital India”.
The Merchandise Exports from India Scheme or MEIS scheme is a single policy that is formulated by combining 5 schemes to boost the merchandise export. The incentives under this scheme are offered as duty scrips as a percentage of the Free on Board (FOB) value of exports.
SEIS is a short form for the Services Exports from India Scheme. It is a modification of the Services from India Scheme (SFIS). The new SEIS is only applicable for service providers in India and is based on the net foreign exchange gain.
Both of these policies are applicable to the SEZ (Special Economic Zone) units.
How Is The Foreign Trade Policy of India 2021-26 Working?
To ensure the ease of doing business and higher trade facilitation, e-filing of forms and paperless trade has become the main priority.
Ecommerce export is applicable on items worth less than or up to 25,000 per shipment. Further, provisions for EOUs (Export Oriented Units), export hardware and software technology park are provided.
Next, duty-free scrips are offered to the exporters under a variety of export promotion schemes provided by the Indian government. Further, these scripts can be transferable and/or nontransferable.
Major Expectations From The Latest Foreign Trade Policy of India
- Hassle-free credit access for exporters
- WTO-compliant tax incentives
- Better and advanced infrastructure
- Tax break for exporters, Reduction in duty charges
- Modern trade practises by digitized eCommerce
- Increased export awareness among the new and old business
- Addressing import wishlist.
- Increased employment opportunities
These are a handful of things the manufacturing and service sector is expecting from the new trade policy. Although the policy has already come into action from 1st April 2021, there is still a long way to go to achieve all these goals. Coronavirus has shattered the global markets to a great level and has also broken down the spine of the world economy. Here, the international trade policies can do a great job in the upliftment of the market and economies.
How The New Foreign Trade Policy Will Make India A $5 Trillion Economy? Is It Possible?
The main tool for achieving the goal of USD 5 trillion within the time frame i.e 5 years, is fueling the exports, including both services and merchandise.
This will be done strategically by addressing the local as well as foreign constraints related to all kinds of frameworks including policy, regulatory and operational, to enhance the ease of doing business and reduce the operational cost at the same time.
Covid-19 is still predominant in the country and also in many parts of the world. Further, it’s just the beginning of the new Foreign Trade Policy of India, so nothing can be said. However, the schemes look promising and also practical. If everything goes according to this structured framework, the USD 5 trillion marks will definitely be achieved within the designated time.