Model Answer
0 min readIntroduction
Foreign Trade Policy (FTP) is a set of principles for facilitating and promoting India’s international trade. The FTP 2021-26, announced on March 31, 2021, aims to make India a leader in global trade. It builds upon the ‘Atmanirbhar Bharat’ (Self-Reliant India) vision, focusing on enhancing export competitiveness, reducing import dependence, and promoting diversification of export markets. The policy operates within a rapidly changing global trade environment marked by geopolitical tensions, supply chain disruptions (exacerbated by the COVID-19 pandemic and the Russia-Ukraine war), and a growing emphasis on sustainability. Therefore, expectations from FTP 2021-26 are high, demanding a dynamic and responsive framework to navigate these complexities and unlock India’s export potential.
Key Features of FTP 2021-26
The FTP 2021-26 introduced several key features, including a new scheme for Remission of Duties and Taxes on Exported Products (RoDTE), simplification of procedures, and a focus on promoting exports from Special Economic Zones (SEZs). It also emphasized digitalization and reduced paperwork. The policy is structured around two main schemes: the Scheme for Remission of Duties and Taxes on Exported Products (RoDTE) and the Export Infrastructure Export Scheme (EIES).
Expectations from Foreign Trade Policy 2021-26
1. Boosting Exports & Diversification
- Enhanced Export Targets: A major expectation is to achieve ambitious export targets, aiming for a significant increase in India’s share of global trade. The government aims to reach $2 trillion worth of exports by 2030.
- Market Diversification: Reducing reliance on traditional markets like the US and Europe and exploring new opportunities in Africa, Latin America, and ASEAN countries is crucial. The FTP should incentivize exports to these regions.
- Product Diversification: Moving beyond traditional exports like textiles and gems & jewellery to high-value products like engineering goods, electronics, and chemicals is essential.
- Promoting Services Exports: Recognizing the growing importance of the services sector, the FTP should provide incentives for exports of IT, healthcare, education, and other services.
2. Enhancing Competitiveness & Ease of Doing Business
- Streamlining Procedures: Further simplification of export-import procedures, reducing documentation requirements, and implementing a fully digitalized trade facilitation system are expected.
- Reducing Logistics Costs: High logistics costs are a major impediment to export competitiveness. The FTP should focus on improving port infrastructure, reducing transportation costs, and promoting integrated logistics solutions.
- RoDTE Scheme Effectiveness: Ensuring the effective implementation of the RoDTE scheme, providing timely refunds, and expanding its coverage to more products are critical.
- Addressing Infrastructure Deficiencies: Improving infrastructure related to export promotion, such as testing facilities, packaging centers, and quality control labs, is necessary.
3. Leveraging Technology & Innovation
- Promoting E-commerce Exports: Facilitating cross-border e-commerce by simplifying regulations, providing logistics support, and promoting digital payments.
- Supporting Technology Upgradation: Incentivizing exporters to adopt new technologies, such as automation, artificial intelligence, and blockchain, to improve efficiency and quality.
- Focus on R&D: Encouraging research and development in export-oriented industries to develop innovative products and processes.
4. Aligning with Global Trade Trends & Sustainability
- Green Trade: Promoting exports of environmentally friendly products and adopting sustainable trade practices. This includes incentivizing the production of renewable energy equipment and organic products.
- Supply Chain Resilience: Building resilient supply chains by diversifying sourcing, promoting domestic manufacturing, and reducing dependence on single suppliers.
- FTAs & Trade Agreements: Actively pursuing Free Trade Agreements (FTAs) with key trading partners to reduce trade barriers and enhance market access. India has recently signed the India-Australia Economic Cooperation and Trade Agreement (ECTA) and the India-UAE Comprehensive Economic Partnership Agreement (CEPA).
5. Promoting MSME Exports
- Dedicated Support for MSMEs: Providing targeted support to MSMEs, including financial assistance, marketing support, and access to technology.
- Cluster Development: Promoting the development of export clusters to enhance competitiveness and facilitate collective marketing.
- Simplifying Export Finance: Improving access to export finance for MSMEs by reducing interest rates and simplifying documentation requirements.
| Area | Expectations |
|---|---|
| Export Promotion | Achieve $2 trillion exports by 2030, diversify markets & products, boost services exports. |
| Competitiveness | Streamline procedures, reduce logistics costs, effective RoDTE implementation. |
| Technology | Promote e-commerce, support technology upgradation, focus on R&D. |
| Sustainability | Promote green trade, build resilient supply chains, pursue FTAs. |
Conclusion
The FTP 2021-26 represents a crucial step towards realizing India’s export potential. Meeting the expectations outlined above requires a concerted effort from the government, industry, and other stakeholders. A dynamic and adaptable policy framework, coupled with effective implementation and continuous monitoring, is essential to navigate the evolving global trade landscape and position India as a leading exporter. Furthermore, addressing non-tariff barriers and improving the overall trade infrastructure will be vital for sustained export growth.
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.