India's New Foreign Trade Policy May Be For Shorter Tenure Amid Global Uncertainty
Due to Russia-Ukraine crisis, the duration of India's new foreign trade policy is likely to be shortened to three years.
Amid macroeconomic volatility due to the Russia-Ukraine crisis, India's new foreign trade policy is likely to be shorter in duration, and include guidelines for allowing export-import transactions using the rupee and developing 50 districts into export hubs, according to two government officials.
The duration of India's new foreign trade policy is likely to be shortened to three years instead of five, according to two government officials, who spoke on condition of anonymity as the matter is not public yet.
The geopolitical situation is dynamic and evolving for all countries, and hence, a foreign trade policy may become irrelevant if it's not modified at the right time, said the first official. Therefore, the foreign policy cell is considering reducing the duration of the new trade policy, the official said.
The cell comprises top officials from the Commerce Ministry and the Directorate General of Foreign Trade.
The current policy will expire in September. On March 31, 2020, the central government had extended it for a year due to the pandemic. It was subsequently extended till September this year.
The Ministry of Commerce is planning to send the final draft of the policy to the Ministry of Finance by mid-August. It will then be rolled out before the end of September, according to the first official quoted above.
The new policy will also select 50 districts to be developed as export hubs, according to the two officials quoted above.
To instill competition among states, detailed guidelines will be given for selection of 50 districts through a challenge route method, said the first official. The districts with products that have maximum scope for scale and revenue generation will be chosen in the pilot phase. Around 60% of the cost involved will be borne by the central government and the remaining by the states, the official said.
The new policy will have to factor in the Reserve Bank of India's guidelines allowing export-import transactions in rupee, said the second government official. The current policy does not provide export incentives for settlement of trade in rupee, except with Iran, the official said. The incentives include rebate in central and state taxes.
"In order to promote growth of global trade with an emphasis on exports from India and to support the increasing interest of global trading community in INR, it has been decided to put in place an additional arrangement for invoicing, payment, and settlement of exports/imports in INR," the RBI's notification issued on July 11 said.
Emailed queries to the Ministry of Commerce, Ministry of Finance, and the NITI Aayog remained unanswered.