The New Foreign Trade Policy(FTP) 2021-2026

[Prasanna CP]

India’s new FTP will come into effect from 1^st April 2021 for a period of 5 years. The FTP provides basic framework and strategy for promoting exports and carrying out trade between the nations.

The FTPs are notified by the central government in exercise of powers conferred under section 3 of chapter II to Foreign Trade (Development & Regulation) Act, 1992. The Department of Commerce (DoC) under the Ministry of Commerce and Industry is responsible to formulate, implement and monitor the FTP.

The current FTP 2015-2020 which came into effect on 1^st April 2015 was extended by one year till 31^st March 2021, due to COVID-19 pandemic.

Current Trends showing a conducive environment for the new policy

• Between April and November 2020, India registered trade surplus of US$ 13.59 billion (total exports: US$ 304.25 billion and the total imports: US$ 290.66 billion).
• India’s trade deficit with China hits a five-year low on the back drop of slump in imports from China.
• The Indian MSME sector has now moved towards the growth phase, thanks to the Indian festival season, and it is time for the sector to realize and capitalize its prospects in the international markets.
• Project Export Promotion Council of India (PEPC) has compiled information of about eighty-five upcoming projects, which was circulated it to its members in December 2020, to enable them to identify and tap potential business opportunities[i]

 Expectations under new FTP

The new FTP will strive to achieve the target of US$ 5 trillion economy and make India a leading player in the area of international trade.

The District Exports Hubs initiative will be an important feature in the new FTP for enhancing and mobilizing the export potential of each district of the country[ii]. The objective is to convert each district of the country into an export hub by identifying products with export potential in the district. Further DoC sought to make States active partners in exports. Consequently, States can actively develop specific export strategies based on the competence and strength specific to its region.

With the government’s increased focus towards the MSME sector to tap its unused potential, new incentives for MSMEs seeking to export through e-commerce channels can be expected.

Moving towards the glory

The tested times of COVID-19 is over, with people getting adopted to the new normal. If India destined to come anyway closer to achieving the target of US$ 5 trillion economy, it means the nation would have come across several hurdles on its way before reaching to that place.  

Issues need to be addressed in order to achieve the targets:

• Infrastructure bottlenecks such as container shortage, storage facilities etc.,
• High transaction and logistics costs
• Complex customs and tax procedures
• Manufacturing constraints such as non-availability of ample resources for production, limited capital etc.,
• Inadequate diversification in service exports

Forget about the results, it is time for India to take the right decisions now to start the progress. With the proper planning and focused implementation of the policies India can be placed at a right path. The new FTP is said to play a vital role in this journey towards the glory.

[i] Ministry of Commerce and Industry – statement on 12^th Jan 2021

[ii] Ministry of Commerce and Industry – Achievement report for December 2020