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New approach to Trade transit Facilities for adjacent countries

  • Published
    3rd Apr, 2023

The New Foreign Trade Policy (FTP) has introduced an additional consideration in providing such trade transit facilities for adjacent countries.

About the development:
  • Background:
    • The Foreign Trade Policy 2015-20 stated that the Transit of goods through India from/or to countries adjacent to India should be regulated by bilateral treaties between India and those countries.
    • Also, they are subject to such restrictions as may be specified by DGFT [Directorate General of Foreign Trade] by international conventions.
  • This has been revised in Section 2.23 of the new FTP document to state that such transit of goods “shall be enabled and regulated by strategic and economic interests of India as well as the bilateral treaties between India and those countries.”
  • While the previous policy empowered the DGFT to frame schemes or issue necessary instructions “to promote trade and strengthen economic ties with neighbouring countries”, the new policy rephrases the first objective as “promote and regulate trade”.
  • Empowering Neighbourhood first policy: The changed language and subtle shift in the stance on trade with neighbouring countries in the new policy could unnerve some land-locked countries around India such as Nepal and Bhutan that rely on goods’ transit through India.
  • In line with India’s commitment to WTO: Freedom of transit to landlocked countries is guaranteed under Article V of the WTO’s General Agreement on Tariffs and Trade

Features of New Foreign Trade Policy 2023:

  • It replaced the extant policy that had been in place since 2015.
  • Aim: New policy aims to almost triple India’s goods and services exports to $2 trillion by 2030, from an estimated $760 billion in 2022-23.
  • No Sunset date: The new policy will have no sunset date and will be tweaked based on the emerging world trade scenario and industry feedback.
    • While the policy will be open-ended, the schemes sanctioned under it will be time-bound.
  • One-time Amnesty: The new FTP is introducing a one-time Amnesty Scheme for exporters to close the old pending authorizations and start afresh. 
  • New growth areas: The policy has included “merchanting trade” within its ambit by opening up a new area of potential exports.
    • Exporters in India can source goods from another country and send them to a third country without touching Indian shores. This will also enable exports of restricted goods
  • Advance authorization Scheme: A Special advance authorisation scheme is being launched for the clothing and apparel sector to react to market demands and fashion trends faster.
    • Other mechanisms like star ratings to recognise exporters will be rejigged to lower qualification thresholds.
  • Towns of Export Excellence: Four towns in Uttar Pradesh — Faridabad, Moradabad, Mirzapur and Varanasi — were announced as centres of export excellence for their performance in apparel, handicrafts, handmade carpets and handlooms, respectively.
    • The new trade policy will make all the PM Mitra textile parks eligible to get benefits as standard services providers.
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