Govt may shorten FTP term to push trade amid volatility

The government may opt for a foreign trade policy that runs for fewer than the five years originally targeted, allowing it to make quick interventions and changes if necessary in a volatile global economic environment.

The foreign trade policy for 2022-27, slated to be announced on 30 September, was deferred last month in a last-minute change of plans.

The Centre expects exports to grow to around $460 billion in this financial year, which is around 9% higher than the previous year. However, exports in September slowed to a 19-month low of 4.8%.

Officials in the department of commerce pointed out that a five-year trade policy may be losing its relevance as the government has, in any case, been announcing tweaks and changes to push exports as and when required.

“We can look at a foreign trade policy for a shorter period, maybe till 2025, and not necessarily a five-year FTP. When tweaking is required, one cannot wait for five years. The way five- year plans have lost relevance for the economy, a five-year FTP may not be very beneficial,” said an official.

“Earlier exporters had to wait for the five-year foreign trade policy to launch any new scheme, like duty remission scheme, etc. We have already done that and did not wait for the FTP to launch. We have already been doing minor tweaking and easing of procedures, and IT enablement so people do not have to visit government offices unnecessarily,” the official added.

Last year, the government introduced World Trade Organization-compliant schemes, including Remission of Duties and Taxes on Exported Products (RoDTEP) and Rebate of State and Central Levies and Taxes (RoSCTL) schemes.

The trade policy to be announced last month was expected to have new chapters on e-commerce, districts as export hubs, and SCOMET -- dual-use items straddling civilian, industrial and military use -- thereby placing a special emphasis on them.

The Foreign Trade Policy 2015-20, which was to end on 31 March 2020, has been extended four times so far— earlier due to the covid-19 pandemic, and more recently due to global economic uncertainties. It is now valid till 31 March 2023.

Queries emailed to the department of commerce last week remained unanswered till press time.

Ajay Sahai, director general and chief executive, Federation of Indian Export Organizations (FIEO), said that a five- year FTP was required to help exporters plan better. “While we agree that international trade is highly dynamic and requires quick interventions to address emerging challenges, a foreign trade policy for a longer period provides a stable regime which helps exporters and manufacturers to plan accordingly,” he said. “We can have such a policy in which macro parameters remain unchanged though timely micro interventions are made to meet the eventualities of global trade,” added Sahai. WTO has estimated global trade growth to slow to 1% in 2023 from 3.5% in 2022.

Sanjay Budhia, the chairman of CII National Committee on EXIM, said that though facilitating schemes or short-term policies and being proactive and responsive to requirements are important to address challenges, a five-year policy has a “significant role in accelerating economic flow within India and endorsing a globally oriented economy”. “To reach the target of $1 trillion exports each for merchandise and services sectors, effective collaboration among key stakeholders, including relevant policymakers from the central and state governments and Indian missions and industry is crucial,” he said.