The Foreign Trade Policy (FTP), which influences trade relations and growth, is a key factor in determining the economy of any nation. India is one of the most important economies on the planet and has actively formulated foreign trade policy since 1947. The article describes the structure, objectives and impact of India’s foreign trade policy.
1. The Foreign Trade Policy
These policies define the laws and regulations that regulate international trade. India’s FTP has a primary focus on:
- Facilitating ExportsExporting goods and services is a way to boost foreign currency reserves.
- Encouraging Foreign InvestmentCreate a favorable environment for Foreign Direct Investment (FDI).
- Enhancing economic growthTrade is a way to support the growth of an economy.
2. History of Indian Foreign Trade Policy
2.1. Pre-liberalization Era (1947-1991)
- Initially, the FTP was a protectionist program with tariffs and regulations that were designed to support domestic industries.
- Focus was on import substitution leading to limited exports.
2.2. Post-liberalization Era (1991-Present)
- India’s economic liberalization and reforms began in 1991. The result was a significant change in FTP.
- In 2004, the New Foreign Trade Policy was introduced. This marked a change towards an open trading regime.
3. India’s foreign trade policy objectives
India’s Foreign Trade Policy is designed to achieve a number of objectives.
- Export competitiveness: Enhancing the Competitiveness of Your BusinessImprove the competitiveness of Indian products and services on the international market.
- Promoting InvestmentAttracting Foreign Investment into various sectors.
- Generate EmploymentCreate jobs by expanding trade-related industries.
- Facilitating Technology TransferEncourage the adoption of new technologies by collaborating with foreign countries.
- Maintaining the Balance of PaymentMaintaining healthy payments balances through an increase in exports.
4. The current foreign trade policy: Key features
4.1. Make in India Initiative
- In 2014, the initiative was launched to boost manufacturing and exports in India.
- Production-Linked Incentive Program (PLI) is one of the incentives available to help attract investments in important sectors.
4.2. Foreign Trade Agreements
- India signed FTAs to increase trade with ASEAN nations, Japan, South Korea, and South Korea.
- FTAs reduce trade barriers by promoting bilateral trade and reducing tariffs.
4.3. Incentive Plans
- By providing incentives, schemes like the Merchandise Exports From India Scheme (MEIS), aim to encourage exports.
- SEIS (Services Exports from India Scheme), encourages the export of services.
4.4. E-Commerce Framework
- FTP has provisions that encourage online transactions.
- The COVID-19 Pandemic has made this more prevalent, as well as the move to digital platforms.
5. The Challenges of Foreign Trade Policy
Even though India has a progressive FTP program, there are still challenges:
5.1. Regulatory hurdles
- Foreign players can be discouraged from entering India’s market by the complex regulations and requirements for compliance.
5.2. Infrastructure Deficiencies
- Lack of infrastructure and logistics can hinder trade operations. This impacts overall competitiveness.
5.3. Global Economic Uncertainty
- India’s ambitions to export can be adversely affected by global economic downturns or trade wars.
5.4. 5.4.
- Long approval processes can delay project implementation and discourage investment.
6. FTP: Recent Advances
6.1. Revised Foreign Trade Policy (2021-26)
- This latest FTP focuses on ease of business, technology advancements and sustainability.
- By 2025/26, the goal is for exports to reach US$ 1 trillion.
6.2. Digital Initiatives
- It was a major step to improve transparency and efficiency by introducing the DGFT Business Portal.
7. The Impact of Foreign Policy
The impact of foreign trade policy on the economy is significant.
- Economic GrowthExport growth is positively correlated with GDP.
- Job CreationExports increase job growth in many sectors.
- Foreign Exchange ReservesExports increase foreign currency reserves and stabilize the currency.
The Frequently Asked Questions
Q1: What are the major objectives of India’s foreign trade policy?
You can also find out more about the A-Team here.Main objectives are to improve export competitiveness and promote investment.
Q2: What impact does Make in India have on the foreign trade sector?
You can also find out more about the A-Team here.Make in India aims at boosting manufacturing, attracting foreign investment and increasing exports.
Q3: How important are Foreign Trade Agreements to the economy?
You can also find out more about the A-Team here.Trade is facilitated by FTAs, which reduce tariffs and other non-tariff restrictions between members. This increases trade and improves the relationship.
Q4 What challenges does India face in its trade policy?
You can also find out more about the A-Team here.Some of the key challenges that can hamper trade and investments are: regulatory barriers, lackluster infrastructure, uncertainty in global economies, and bureaucratic delays.
Q5: What impact has ecommerce had on India’s foreign trade?
You can also find out more about the A-Team here.As a result of the rise in e-commerce, businesses can now reach global markets. FTP contains provisions for ecommerce to increase exports via digital platforms.
How has India’s foreign trade policy changed recently?
You can also find out more about the A-Team here.The FTP is a revised program (2021-26) that focuses on the ability to do business, technology advancements and sustainability.
Q7. What are the incentives schemes MEIS and SEIS?
You can also find out more about the A-Team here.These schemes give financial incentives based on the performance of exporters. MEIS is a scheme that focuses on exporting merchandise, while SEIS encourages service exports.
Q8. What are the benefits of foreign investment for India
You can also find out more about the A-Team here.For India’s industries to be competitive on the international market, foreign investments are vital for a number of reasons. These include technology transfer, sharing knowledge, creating jobs, and improving their productivity.
Q9: What support does the Indian Government offer to small exporters in India?
You can also find out more about the A-Team here.To help improve the capabilities of small exporters, the government offers a variety of support programs including credit and training, as well as participation at international trade shows.
What are the links between trade and economic growth?
You can also find out more about the A-Team here.An effective foreign trade policy can fuel economic growth, by encouraging exports, attracting investment from abroad, and creating new jobs that ultimately add to the GDP of a nation.
The conclusion of the article is:
India’s trade policies have evolved considerably, particularly after liberalization during the 1990s. India’s current emphasis on becoming a global manufacturing hub, and improving export competitiveness, positions it well within the global economy. To achieve sustainable economic growth, it is important to address the issues facing the trade sector. India’s FTP needs to be able to adjust to the changing global trading environment to maintain its long-term growth and success.
