The New Foreign Trade Policy (FTP) and Handbook of Procedures (HBP) for 2023 were issued by Commerce and Industry Minister Piyush Goyal on March 31. The DGFT informed the public on 1 April 2023 that the same thing will happen. As a major player in international trade (both imports and exports) and in online commerce, the Electronics Systems Design & Manufacturing (ESDM) sector stands to benefit greatly from the new legislation. India has set an aggressive export target for the Electronics industry of around US$ 16 Bn for the current Financial year, and the new FTP 2023 will allow them to reach that goal. If India is to meet its lofty goal of producing $300 billion worth of electronics by 2026, it will need to increase this figure by a factor of ten, to more than $100 billion. Changes were made to the scheme to emphasize tax relief rather than incentives. It is also actively seeking further support through the use of automation, technological advancements, and ongoing process re-engineering. Significant focus has been placed on developing areas, particularly those with potential for exports and e-commerce.
Minister tells reporters, “The policy is dynamic and has been kept open ended to accommodate the emerging needs of the time,” as reported by the Press Information Bureau. He explained that the policy has been in development for quite some time, with input from many different parties. India’s total exports, which include both services and goods, have surpassed US$ 750 billion, and they are on track to exceed US$ 760 billion by the end of the year.
“The remarkable achievement in overall export figure of crossing US$ 760 Billion in these challenging times around the world has been the result of enthusiasm and encouragement pumped in by the Prime Minister.” After consulting with the Prime Minister, this result is in line with the planned goal for 2021. It is crucial to seize every available exporting opportunity. While India holds the G20 presidency for the next five months, Minister Goyal emphasized the importance of a massive, sector- and country-specific outreach effort.
How FTP Is Going To Be A Game-changer For India’s Electronics Industry
The success of the FTP strategy rests squarely on its four pillars: export promotion through partnership, convenience of doing business, e-initiatives, and incentive to remit.
The following are among the many highlights of the FTP, as outlined by the industry group ELCINA:
- There is no end date to the new policy. Subsequent revision(s) shall be done as and when required.
- Approvals for various permissions under FTP shall now be online without any physical interface.
- Reduction in user charges for MSME under Advance Authorization (A) and Export Promotion Capital Goods (EPCG) schemes.
- Revamp of e-Certificate of Origin (CoO) platform for self-certification of CoOs as well as automatic approval of the same is proposed, where feasible.
- Paperless filing of export obligation discharge applications for greater use of technology
- Facilitation of e-commerce export by extending all FTP benefits to such exports.
- Introduction of a special one-time amnesty scheme for one-time settlement of default in export obligations.
- The lack of an expiration date gives the policy a sense of long-term stability, which is good news for India’s export sector and foreign direct investments. For Policy to be successful, its execution will be crucial.
- The Government’s goal of making it easier to do business may be aided by the widespread adoption of automated processes and the use of paperless application submission. The adoption of such digitalized processes by businesses will necessitate system changes.
- Many micro, little, and medium-sized enterprises (MSME) participate in and contribute to the development of the Electronic Industry. The lower operational cost and increased exports of MSMEs are projected to result from the reduction in user charges in the case of AA and EPCG schemes.
- The growth of the electronics industry will be greatly aided by the creation of E-Commerce Hubs and the ONDC (Open Network for Digital Commerce). They could also pave the way for a substantial increase in digital commerce across national borders.
“As we are aware that this policy was long awaited and brings about a major shift in India’s approach to foreign trade, simplifying the import procedures and export promotion,” said Sanjay Agarwal, President ELCINA & MD, Globe Capacitors, emphasizing the significance of FTP in India’s electronics industry. Indian officials are optimistic that the new policy will help them meet their ambitious goal of increasing electronics exports to over $100 billion by the end of the current fiscal year (2025–2026).
In addition, Ernst & Young (EY) director Pankaj Jain confirmed that the FTP 2023 shifts focus from an incentive-based model to a tax-remission-based one. There are, of course, no MEIS/SEIS-based schemes left. Basic schemes like AA, DFIA, RoSCTL, RoDTEP, EPCG, etc. are all that are covered under the policy. Working together, exporters, states, and municipalities could boost exports. E-commerce exports, creating districts as export hubs, standardizing policy for special chemicals, organisms, materials, equipment, and technologies (SCOMET), etc., would all receive additional attention.
The Strategies to Lead India’s Electronics System Design
Prior to its three-year extension to the end of March 2023, the foreign trade policy had been in place from 2015 to 2020 with the goal of achieving exports of USD 900 billion by the end of 2020. Now, the government plans to increase exports to USD 2 trillion by 2030, with equal participation from the service and manufacturing sectors. The focus of the FTP is on re-engineering and seamless automation to create trouble-free trade for exporters in alliance with other countries.
With the use of a novel payment settlement mechanism released by the RBI in July 2022, the government is now also attempting to promote the use of the Indian rupee in cross-border business. The FTP is replacing incentive schemes with a regime that is more technologically and partnership-oriented in order to promote growth in the electronics industry and export promotion.