The foreign trade policy of a country outlines the government’s strategy for conducting trade with other countries. In India, the Foreign Trade Policy (FTP) is formulated by the Ministry of Commerce and Industry and is revised every five years.
Development of Foreign Trade Policy in India
- Pre-Liberalization Era (1947-1991): During this period, India’s foreign trade policy was highly restrictive and focused on import substitution and protectionism. The government used various measures such as import licensing, high tariffs, and strict quotas to restrict imports and promote domestic production.
- Liberalization Era (1991-present): In 1991, India adopted a policy of economic liberalization that included significant reforms in the foreign trade sector. The government dismantled many of the trade barriers and introduced measures to promote exports, such as export subsidies, duty drawbacks, and tax exemptions.
- Introduction of Exim Policy (1992-1997): In 1992, the government introduced the Exim Policy, which aimed to provide a framework for promoting exports and rationalizing imports. The policy included measures such as the Export Promotion Capital Goods (EPCG) scheme, the Duty Entitlement Pass Book (DEPB) scheme, and the Export Oriented Units (EOU) scheme.
- Introduction of Foreign Trade Policy (1997-present): The Exim Policy was replaced by the Foreign Trade Policy in 1997, which is revised every five years. The current policy covers the period 2015-2020 and includes measures to promote exports, improve competitiveness, and facilitate trade.
Scope of Foreign Trade Policy in India
- Export Promotion: The foreign trade policy includes measures to promote exports and increase the competitiveness of Indian goods and services in the global market. This includes incentives and support to exporters, simplification of export procedures, and market development activities.
- Import Regulation: The policy also includes measures to regulate the import of goods to protect domestic industries and balance trade. This includes import restrictions, anti-dumping measures, and safeguards.
- Trade Facilitation: The foreign trade policy aims to simplify procedures and reduce transaction costs for traders to facilitate trade. This includes measures such as electronic clearance of goods, single window clearance, and reduction of physical documentation.
- Investment Promotion: The policy includes measures to attract foreign investment and promote joint ventures and collaborations with foreign companies. This includes measures such as setting up of special economic zones, foreign investment promotion board, and investment in infrastructure.
