Biswajit Dhar writes: E-commerce, a focus of FTP 2023, is an area in which India has looked less comfortable in the past for at least two reasons. (Representational/File)
It should have focussed on facilitation, instead of regulation
Written by Biswajit Dhar
Updated: April 5, 2023 07:54 IST
The long-awaited Foreign Trade Policy 2023 (FTP 2023) was unveiled at a time when India’s merchandise export performance is a mixed bag. While several technology-intensive sectors are showing dynamism over the past year, with the electronics sector leading this group, labour-intensive sectors, especially the textiles and clothing sectors, are downbeat. In general, exports have been affected by a slowing global economy, and this situation could get worse if the projections for the next two years are any indication.
Given the challenges Indian exporters could be up against, FTP 2023 needed to go beyond its standard format, which has remained unchanged since the policy was introduced in 2004. At the outset, every Foreign Trade Policy informs us that the policy is “notified by [the] Central Government, in the exercise of powers conferred under Section 5 of the Foreign Trade (Development & Regulation) Act, 1992”. This Act empowered the Centre to “make provision for the development and regulation of foreign trade by facilitating imports and increasing exports” and to “make provision for prohibiting, restricting or otherwise regulating… import or export of goods or services or technology”. So, the 1992 Act was set in the 20th-century mindset of regulating and restricting trade and had accordingly included trade policy instruments. The framework of trade policy in the 21st century has since moved to development and facilitation of trade, but there is no reflection of this in FTP 2023. Instead of recasting this vitally important policy, FTP 2023 is a compilation of “Foreign Trade Procedures” in which the words, regulate, prohibit, and restrict find more mentions than “facilitate”.
Focus on the latter would have given FTP 2023 an entirely new character, one that includes strategies needed to adopt 21st-century trade policy instruments. Today, most countries rely on improvements in product quality and production efficiencies by rapid infusion of technology to expand their presence in global markets instead of using export incentives. This approach meant that product and process standards are the new trade policy instruments. This is evident from the bilateral/plurilateral trade negotiations India is currently engaged in. The negotiating draft of the EU includes a plethora of these regulatory standards. Similarly, the three pillars of the Indo-Pacific Economic Framework in which India is participating are about these standards. These standards are increasingly being used by most member countries of the WTO. Thus, the ability of India’s businesses to meet these standards would eventually determine the benefits that they can garner.
FTP 2023 was an ideal platform for the government to prepare India’s exporters to cope with the challenges in the global market. This would require the Directorate General of Foreign Trade (DGFT) to coordinate with all the standard-setting agencies of the government, the export promotion councils, and the relevant institutions in the private sector to prepare a roadmap for upgrading institutions and production facilities. This means that the DGFT’s primary role would have to be that of a facilitator while the regulatory functions should be small but effective. In contrast, FTP 2023 would like the DGFT to continue playing the role of imposing import “prohibitions” or “restrictions”, one example being the list of “Principles of Restrictions” .
Export promotion schemes were rejigged after a WTO dispute settlement panel ruled against India in 2019 following a complaint by the US. The panel’s finding was that these schemes, especially the Merchandise Exports from India Scheme, provide export subsidies, which are not allowed under WTO rules. A new scheme was launched in 2021 to neutralise the effect of taxes and duties that are included in exported goods, namely, the Remission of Duties or Taxes on Export Products (RoDTEP) Scheme. When it was introduced, the RoDTEP Scheme covered 8,555 tariff lines. In December 2022, the Scheme was extended to cover 10,436 tariff lines.
The Rajya Sabha’s Standing Committee on Commerce examined the Scheme and, in its report, presented in December 2022, found several weaknesses, especially the fact that rates of remission of duties were lower than desirable. In view of its salience for exporters, FTP 2023 could have responded to the recommendations of the Standing Committee, which it has not. This lacuna has continued possibly because the description of the RoDTEP Scheme has not been updated from an earlier version of the Foreign Trade Policy: Paragraph 4.5(x) of FTP 2023 says that the “Scheme will take effect for exports from 1st January 2021” (emphasis added).
Developing districts as export hubs is a novel idea mooted in FTP 2023. If it can be implemented effectively, the objective of balanced regional development, once an integral part of development programmes, can be realised. However, FTP 2023 merely speaks of export promotion committees that are to be set up at the level of the districts and states/UTs. What is missing is a commitment to support the critical component of such a programme, namely, efficient infrastructure.
E-commerce, a focus of FTP 2023, is an area in which India has looked less comfortable in the past for at least two reasons. First, a subset of WTO countries has initiated discussions on e-commerce for extending the rules of the organisation in this area, but India opposes this process. Second, advanced countries have been seeking data portability, which India has refused to accept. Does the mention of e-commerce in FTP 2023 imply that India is ready to engage in the WTO?
The writer is former professor, JNU
© The Indian Express (P) Ltd