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Business News/ Economy / Trade policy may pitch for FTA with US over five years
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Trade policy may pitch for FTA with US over five years

The FTP will aim to promote and diversify services exports beyond the US and EU markets

The government plans to coordinate broad strategies with ministries and departments concerned for reducing non-essential imports. bloombergPremium
The government plans to coordinate broad strategies with ministries and departments concerned for reducing non-essential imports. bloomberg

BENGALURU : The US is among key trading partners with whom India will seek to strike free trade agreements over the next five years in a bid to boost its share of exports in global trade to 3% by 2027 from 2.1% at the moment.

It is part of vision for the five-year foreign trade policy (FTP) 2022-2027, likely to be unveiled on 30 September.

The US is currently not in FTA talks with India.

Commerce and industry minister Piyush Goyal during a recent visit to the US had said that India would be “happy and willing" to negotiate a trade pact with the US, provided Washington decides to look for a new free trade partner. He said the US administration, as a policy, is not looking at a FTA with any new partner.

India was discussing a mini-trade deal with the US to boost economic ties during the Trump administration. After concluding pacts with the UAE and Australia, India is negotiating FTAs with Canada, UK, and the European Union.

The commerce department is of the view that while domestic sensitivities in various areas would be considered during negotiations, India would adopt an accommodative approach in various areas of interest on the principle of reciprocity.

The government also plans to coordinate broad strategies with concerned ministries and departments for reducing non-essential imports, according to a presentation by the department of commerce reviewed by Mint.

The foreign trade policy will have three new chapters—on e-commerce, districts as export hubs, and SCOMET (dual use items used for civilian/industrial and military use)—thereby giving special emphasis on them. The chapter on e-commerce will aim to offset some of the transaction costs and promote e-commerce exports from India.

The FTP will also aim to promote and diversify services exports beyond the US and EU markets. “Given that the target is $1 trillion for services exports by 2030, I hope that there will be strategies for services basket diversification beyond IT/ITES under the FTP," said Arpita Mukherjee, professor, ICRIER.

A government official said, “The policy will facilitate coordinated action between states and missions abroad to formulate and execute the trade promotion strategy. There will also be a great emphasis on developing cross-border e-commerce to boost e-commerce exports from India."

The FTP would also likely allow extending concessions from schemes like Remission of Duties and Taxes on Exported Products (RoDTEP) and EPCG in case the transaction is settled in rupees and not only in hard currencies like the dollar or euro. This is in line with the RBI allowing rupee trade.

Over the next five years, the government will work toward promoting select Indian brands and global champions besides promoting exports of pharmaceuticals, tea, coffee, engineering goods and services.

Ajay Sahai, director general and CEO, Federation of Indian Export Organisations (FIEO) said the focus on branding in the new FTP will not only help establish India as a quality supplier of goods and services but will “also enhance per unit realisation of exports and more importantly will take our exports away from the price sensitive segment in which, with little fluctuation in the exchange rate, the business is grabbed by other countries."

Queries emailed to the department of commerce on Thursday remained unanswered till press time.

The new chapter on SCOMET (Special Chemicals, Organisms, Materials, Equipment and Technologies) is aimed at bringing clarity on trade provisions for these dual-use items. Sahai said normal shipments with SCOMET products generally get stuck in customs due to lack of clarity. “Some clarity on SCOMET will be really helpful," he said. 

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Dilasha Seth
" Dilasha Seth is a journalist reporting on macroeconomic policy for the last 11 years. She writes extensively on issues including international trade, macroeconomic data, fiscal policy, and taxation. At Mint, she reports on trade deals that India is signing besides key policy decisions of the Ministry of Finance. She closely tracked and covered the transition to the goods and services tax (GST) regime in 2017 and also writes on direct tax-related issues. In the past, she has worked with Business Standard and The Economic Times. She is based in Bangalore."
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Updated: 23 Sep 2022, 06:29 AM IST
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