Model Answer
0 min readIntroduction
India’s Foreign Trade Policy (FTP) is a set of principles and regulations that govern the import and export of goods and services. It serves as a roadmap for boosting the country’s international trade and integrating it more effectively into the global economy. The FTP is typically revised every five years, although extensions and mid-term reviews are common. The current FTP (2023-28) emphasizes export diversification, promotion of Rupee trade, and leveraging e-commerce. Understanding the objectives, strategies, and promotional measures within the FTP is crucial for comprehending India’s economic trajectory and its role in global trade.
Objectives of India’s Foreign Trade Policy
The objectives of India’s FTP have evolved over time, but generally revolve around the following core areas:
- Enhancing Export Competitiveness: Making Indian goods and services more competitive in international markets through various incentives and support measures.
- Increasing India’s Share in Global Trade: Aiming to increase India’s percentage share of global exports. As of 2023, India accounts for approximately 1.8% of global merchandise exports.
- Promoting Export Diversification: Reducing reliance on a few key export destinations and products, and expanding into new markets and product categories.
- Facilitating Trade: Simplifying procedures, reducing transaction costs, and improving infrastructure to make trade easier.
- Supporting Employment Generation: Boosting export-oriented industries to create more jobs.
- Promoting Rupee Trade: Encouraging settlements in Indian Rupees to reduce dependence on foreign currencies.
Strategies Adopted to Attain Objectives
To achieve these objectives, India has adopted a multi-pronged strategy:
1. Incentive Schemes
Various schemes are implemented to incentivize exporters:
- Duty Entitlement Passbook Scheme (DEPB): (Discontinued in 2011, replaced by other schemes) Allowed exporters to earn duty credit scrips based on export performance.
- Export Infrastructure Incentive Scheme (EIIS): Provided incentives for creating export infrastructure.
- Scheme for Remission of Duties and Taxes on Exported Products (RoDTE): Reimburses the embedded costs of taxes and duties on exported products, making them more competitive.
- Advance Authorization Scheme: Allows duty-free import of inputs required for export production.
2. Institutional Mechanisms
Strengthening institutional support for trade promotion:
- Directorate General of Foreign Trade (DGFT): The nodal agency responsible for formulating and implementing FTP.
- Export Promotion Councils (EPCs): Industry-specific organizations that promote exports of particular products.
- Trade Promotion Organizations (TPOs): Facilitate trade inquiries and provide market intelligence.
- Indian Trade Promotion Organisation (ITPO): Organizes trade fairs and exhibitions.
3. Infrastructure Development
Investing in infrastructure to improve trade logistics:
- Development of Ports: Expanding port capacity and improving efficiency. The Sagarmala project aims to modernize and integrate Indian ports.
- Dedicated Freight Corridors (DFCs): Building dedicated railway lines for freight transport to reduce transit times.
- Air Cargo Infrastructure: Developing air cargo facilities to facilitate faster movement of goods.
4. Trade Agreements
Negotiating and implementing Free Trade Agreements (FTAs) and Comprehensive Economic Partnership Agreements (CEPAs) to gain preferential access to foreign markets. Examples include:
- India-UAE Comprehensive Economic Partnership Agreement (CEPA): Signed in 2022, aims to boost bilateral trade to $100 billion by 2030.
- India-Australia Economic Cooperation and Trade Agreement (ECTA): Signed in 2022, provides preferential access to Australian markets.
Policy Measures Adopted for Trade Promotion
Several policy measures are employed to actively promote trade:
- Town of Export Excellence (TEX): Identifying and developing clusters of export-oriented industries.
- Market Access Initiative (MAI): Providing financial assistance to EPCs for participating in international trade fairs and exhibitions.
- Export Promotion Mission (EPM): Undertaking promotional activities in target markets.
- Digital Commerce Policy: Promoting e-commerce exports through initiatives like the e-SANCHIT platform.
- Rupee Trade Mechanism: Allowing international trade settlements in Indian Rupees, particularly with countries facing currency constraints.
The FTP 2023-28 places significant emphasis on digitalization, including the establishment of a fully digital FTP platform and promoting paperless documentation. It also focuses on building a resilient and diversified export base, with a particular emphasis on labor-intensive sectors.
Conclusion
India’s Foreign Trade Policy is a dynamic instrument that reflects the country’s evolving economic priorities. The objectives of enhancing competitiveness, diversifying exports, and facilitating trade are pursued through a combination of incentive schemes, institutional support, infrastructure development, and trade agreements. The recent FTP (2023-28) demonstrates a commitment to digitalization, rupee trade, and building a resilient export base. Continued focus on these strategies, along with addressing infrastructure bottlenecks and streamlining trade procedures, will be crucial for achieving India’s ambitious trade goals and solidifying its position in the global economy.
Answer Length
This is a comprehensive model answer for learning purposes and may exceed the word limit. In the exam, always adhere to the prescribed word count.