Foreign Trade Policy & Export Promotion Schemes
🟠 Topic 65: Foreign Trade Policy & Export Promotion Schemes
📌 Introduction
India’s Foreign Trade Policy (FTP) is a strategic document that outlines the government’s approach to promote exports, rationalize imports, and enhance India’s integration into the global economy. The policy serves as a roadmap for trade facilitation, export diversification, and competitiveness enhancement. In tandem with the policy, export promotion schemes aim to incentivize domestic producers, ease trade barriers, and boost foreign exchange earnings.
🔹 What is Foreign Trade Policy (FTP)?
📖 Definition
The Foreign Trade Policy is a five-year policy framework formulated by the Ministry of Commerce and Industry, aimed at promoting India’s exports, improving competitiveness, and aligning trade policy with global trade trends.
Key Objectives of FTP
✔️ Enhance India’s export competitiveness.
✔️ Diversify export basket with focus on value addition.
✔️ Promote ease of doing business for exporters.
✔️ Align trade policy with global value chains (GVCs).
✔️ Enhance sectoral competitiveness through incentives and infrastructure.
🔹 Evolution of Foreign Trade Policy
| Period | Focus |
|---|---|
| FTP 2004-09 | Export competitiveness & SEZs |
| FTP 2009-14 | Diversification of export markets |
| FTP 2015-20 (Extended to 2023) | Ease of trading, boosting services exports |
| FTP 2023-28 | Shift from incentives to remission schemes & digitalisation |
Key Targets of FTP 2023-28
✔️ Reach $2 trillion exports by 2030 (goods & services).
✔️ Enhance MSME participation in global trade.
✔️ Promote districts as export hubs under One District One Product (ODOP).
🔹 Components of Foreign Trade Policy
1️⃣ Merchandise Exports
- Promote traditional & non-traditional sectors (textiles, engineering goods, chemicals, electronics).
- Encourage high-value exports (pharma, electronics, auto components).
2️⃣ Services Exports
- India is a global leader in IT services, business services.
- Focus on tourism, health, education, media, and legal services.
3️⃣ Trade Facilitation
- Simplified digital compliance platforms (DGFT Portal).
- Faster export documentation clearance.
- Integration with Customs EDI for seamless processes.
4️⃣ Ease of Doing Business for Exporters
- Simplified application processes for export schemes.
- Reduction in compliance burden (auto approvals under MEIS/RoDTEP).
- Dedicated export promotion councils (EPCs) for every sector.
🔹 Key Export Promotion Schemes
1️⃣ Remission of Duties and Taxes on Exported Products (RoDTEP)
- Replaces MEIS to comply with WTO rules.
- Refunds embedded taxes (state levies, electricity duty) not covered under GST.
2️⃣ Production Linked Incentive (PLI) Scheme
- Incentive linked to incremental production & exports.
- Focus on electronics, pharmaceuticals, textiles, auto, drones, solar modules.
3️⃣ Export Promotion Capital Goods (EPCG) Scheme
- Allows duty-free import of capital goods for export production.
- Export obligation linked to domestic asset creation.
4️⃣ Duty Drawback Scheme
- Refunds customs duties on imported inputs used for exports.
- Supports competitive pricing in global markets.
5️⃣ Special Economic Zones (SEZs)
- Export-focused industrial clusters.
- Tax incentives:
✔️ 100% Income tax exemption for first 5 years.
✔️ Exemptions from customs, excise, and service tax. - Direct access to port & logistics infrastructure.
6️⃣ Districts as Export Hubs
- Identifies unique products in each district.
- Promotes local entrepreneurs and artisans to access global markets.
7️⃣ Market Access Initiative (MAI)
- Financial support for: ✔️ Export promotion events.
✔️ Buyer-seller meets.
✔️ Product branding in international markets.
8️⃣ Trade Infrastructure for Export Scheme (TIES)
- Supports creation of: ✔️ Export processing zones.
✔️ Testing & certification labs.
✔️ Trade facilitation centres.
🔹 Role of Export Promotion Councils (EPCs)
- Sector-specific councils assisting exporters with: ✔️ Market intelligence.
✔️ Trade promotion events.
✔️ Policy advocacy.
✔️ Buyer-seller connects.
Examples
| Council | Sector |
|---|---|
| Pharmexcil | Pharmaceuticals |
| Texprocil | Textiles |
| EEPC India | Engineering Exports |
| SEPC | Services Exports |
🔹 Challenges in Export Promotion
1️⃣ Global Trade Uncertainty
- Trade wars (US-China), geopolitical tensions (Russia-Ukraine) disrupt markets.
- Supply chain disruptions due to COVID-19.
2️⃣ WTO Compliance Issues
- Many export subsidy schemes violate WTO rules.
- Transitioning to remission-based support (RoDTEP) to comply.
3️⃣ Logistics & Infrastructure Bottlenecks
- High logistics costs (13-14% of GDP).
- Poor connectivity to ports in landlocked states.
4️⃣ Limited Product Diversification
- Low share of high-tech exports.
- Reliance on commodities & traditional products (textiles, gems, leather).
5️⃣ Low MSME Integration
- Many MSMEs lack: ✔️ Export knowledge.
✔️ Access to export credit.
✔️ Compliance capacity for international standards.
🔹 Case Study – Success of IT Exports
- India is the global leader in IT services exports.
- IT exports in 2023: ~$194 billion.
- Factors contributing: ✔️ Skilled workforce.
✔️ Digital infrastructure.
✔️ Pro-active export promotion by NASSCOM.
✔️ IT SEZs providing infrastructure and tax benefits.
🔹 Recent Trends in India’s Exports (2023)
| Sector | Exports Value |
|---|---|
| Engineering Goods | $107 billion |
| Petroleum Products | $95 billion |
| Gems & Jewellery | $38 billion |
| Pharmaceuticals | $25 billion |
| Textiles | $32 billion |
📚 Practice MCQ
1️⃣ Which of the following is a remission-based scheme introduced under FTP to comply with WTO rules?
✅ Options:
(a) MEIS
(b) RoDTEP
(c) SEZ Policy
(d) EPCG
2️⃣ Which of the following is NOT an objective of the Foreign Trade Policy?
✅ Options:
(a) Promote self-reliance in agriculture
(b) Enhance export competitiveness
(c) Diversify export markets and products
(d) Improve ease of doing business for exporters
3️⃣ The scheme that allows duty-free import of capital goods for export production is:
✅ Options:
(a) MEIS
(b) EPCG
(c) TIES
(d) SEZ Policy
