What is Foreign Trade Policy- Part 1


On 4th April 2015, the Commerce and Industry Minister, Govt of India, Mrs Nirmala Sita Raman, announced the Indian Foreign Trade Policy for 2015-20. The Foreign Trade Policy has been formulated for 5 years. It looks into, regulates and laws are enacted for the export and import of goods. The introduction of the Foreign Trade Policy is integrated with the vision of the Honourable Prime Minister of India on ‘Make in India’, ‘Digital India’, and ‘Skills India’. The government of India has formulated the trade policy as a way to improve ‘ease of doing businesses. Improving export and import will help India in being a contributor to the present era of globalization. The authorised body of Foreign Trade Policy is Directorate General of Foreign Trade (DGFT).

Legal framework 

  • According to Section 5 of the Foreign Trade (Development and Regulation) Act 1992, the government of India can from time to time formulate laws relating to Foreign Trade Policy. This section also specifies that the laws made should have special provisions or exceptions should be included for Special Economic Zones. This trade policy will remain in force for 5 years, that is, 31st March 2020 (now extended up to 31 March 2021). The Central Government also has the power to amend the trade policy if it is in the public interest. The provisions under Foreign Trade Policy are special provisions and would prevail over general ones. If any benefits have been provided before the date of commencement of the Foreign Trade Policy, then it will continue.
  • Directorate General of Foreign Trade (DGFT) works to help import and export in the country. It makes sure that the whole system of export and import is transparent and efficient. DGFT has always focussed on good governance. In order to facilitate international trade, DGFT consults various Export Promotion Councils as well as Trade and Industry bodies from time to time. DGFT is implementing the Niryat Bandhu Scheme for mentoring new and potential exporters on the intricacies of foreign trade through counselling, training.
  • DGFT has been assisting the clients by giving them time schedules. It has also provided email id, phone number, a website for the stakeholders to communicate and to facilitate them. Further, help desks have also been established in different zones. DGFT has also been modernized by allowing an online complaint system. The online complaint system allows users to register complaints and see its status.  
  • The trading, export, import, development, multilateral and bilateral relations by Special Economic Zone is also looked after by the Department. 
  • The National Committee on Trade Facilitation has been constituted in the year 2016 after India ratified the World Trade Centre Agreement on Trade Facilitation. After India ratified the Trade Facilitation Agreement, it was mandatory for India to set up the National Committee on Trade Facilitation (NCTF). The Chairman of this committee would be the Cabinet Secretary. The NCTF is an inter-ministerial committee. The main objective of the National Committee on Trade Facilitation is to facilitate the implementation of the WTO Agreement on Trade Facilitation. The Committee also developed road maps for trade facilitation. India is not the only country to set up this committee. Many countries like the United Kingdom, Sweden and some developing countries have set up the Trade Facilitation Committees.

Trade facilitation 

  • Directorate General of Foreign Trade works for developing the export and import in the country. For increasing transparency and greater efficiency, the Directorate General of Foreign Trade consults with Export Promotion Council and Trade and Industries bodies. The Directorate also initiated the Niryat Bandhu Scheme. Under this scheme, the people who are new to export and import are provided with knowledge about it. The scheme also attempts to uplift and improve export and import. For more research and for improving the schemes, associations have been formed with organizations that can improve research. An institution named Centre for Research in International Trade has also been set up for the promotion of research in the field.
  • A system of online complaint has also been formulated wherein the exporters can file online applications who are seeking to get their issues resolved. The Export Data Processing and Monitoring System has been started by the Reserve Bank of India to look into the exports. 
  • The Central Government also took a major step towards ease of doing business and through Foreign Trade Policy reduced the mandatory number of documents for export. The transaction time and cost has also been reduced by creating an online portal where the importer and the exporter can directly upload the documents and do not need to travel every time to Regional Authority for submission of the same. Importer exporter code is mandatory for export or import in India. This code can now be generated electronically and will be sent within 2 working days. For this code, an application has to be made to the DGFT. 
  • The Foreign Trade Policy also introduced the concept of Town of Export Excellence which recognizes towns that have a production of more than Rs. 750 Crore. These towns have the potential to increase quality export from the country. These towns which have been notified are being provided with financial support from the Central Government. 
  • National Committee on Trade facilitation has also been constituted under the policy. This Committee has been constituted in pursuance of the World Trade Organization’s Trade Facilitation Agreement signed by India. The Committee implements the provisions which have been incorporated in the WTO Agreement of Trade Facilitation. 

Whole of Government 

The government of India has recognized the fact that international trade cannot be transformed only through the efforts of one department. The government understood that all the departments have to jointly play a role in developing international trade. It was suggested that the State Government can play a major role in making an efficient foreign trade policy. Many State Governments have also taken steps to formulate Export Commissioners. The Department of Commerce has also taken a step forward to help the State Government in formulating strategies relating to exports.

World Trade Organization

In 2018, the United States filed a complaint against India at the World Trade Centre. The complaint was regarding the policies which are promoting exports in the country. The United States claimed that policies to promote export are against the rules of the World Trade Centre. The United States claimed that the export subsidies cannot be maintained and is against the rules of WTO. A report was made after examining the complaint by the WTO Panel on this issue which said that the provisions of Foreign Policy of India which are promoting export by applying export subsidiaries are illegal. 

The report released by the WTO panel might impact the export market of India. These promotional export subsidiaries had always been a stimulant for the exports. The subsidiaries have supported exports by reducing the cost of exports. This might hugely impact the various exporting sectors, given the current situation of the bad economic health of the country and uncertainty due to the trade war of the United States and China. 

Stopping the promotion of export might lead to disastrous consequences in the export and import market of India. Therefore, the country should aim to formulate such foreign policies which are compatible with the policies of the World Trade Organization. The Government should carefully formulate.

Aishwarya Says:

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