India’s Foreign Trade Policy 2023:

New Ideas and Old Challenges

(RESEARCH PAPER)

BY
Shibani Rout
20201bal0106
Prachi Shetty
20201BAL0079
SECTION-2

PRESIDENCY UNIVERSITY
SCHOOL OF LAW
NOVEMBER, 2024
 India’s Foreign Trade Policy 2023:
New Ideas and Old Challenges

Summary

India’s latest Foreign Trade Policy 2023 (FTP) has several new aspects. These include trade
facilitation to cut down the cost and time to obtain export permissions; a grassroots focus on
enhancing exports from various districts; emphasising cross-border e-commerce exports;
promoting merchanting and encouraging greater settlement of trade in the Indian Rupee
(INR). The ostensible goal of the FTP is to encourage India’s goods and services exports to
grow at a faster pace to achieve a combined export target of US$2 trillion (S$2.6 trillion) by
2030. Coming against the backdrop of recent good performance by exports, the FTP aims to
maintain and accelerate the momentum in the years to come. While the objectives of the FTP
are laudable, realising these will require obtaining greater efficiency in internal processes,
higher administrative coordination between central and state departments, establishing
strong merchanting infrastructure and ensuring greater ease of using INR in India’s trade
with its partners.
Synopsis
India’s Foreign Trade Policy (FTP) 2023 introduces several innovative measures to drive
export growth and enhance India’s role in global trade. Key components of the policy include
trade facilitation, grassroots export promotion, support for merchanting trade, encouragement
of e-commerce exports, and the promotion of the Indian Rupee (INR) in international
transactions. These efforts align with India’s target of achieving USD 2 trillion in combined
exports by 2030. The policy addresses current trade challenges and seeks to streamline
processes, reduce costs, and make exports accessible to smaller enterprises. While promising,
the policy’s success will hinge on effective implementation and interdepartmental
cooperation.

Statement of Problem
The current global trade landscape poses challenges, including geopolitical tensions,
logistical bottlenecks, and dependency on foreign currency settlements. India’s previous trade
policy frameworks, while effective, did not fully address the need for inclusive growth or
streamline trade processes adequately. Thus, there is a need for a cohesive strategy that
encourages digitization, supports district-level exports, reduces trade costs, and positions
India as a global trade hub. FTP 2023 seeks to overcome these issues, but its efficacy in
achieving these goals remains to be examined.

Objective of Study
The primary objective of this study is to analyse the Foreign Trade Policy 2023 and assess its
potential to achieve India’s ambitious trade targets, particularly the goal of USD 2 trillion in
exports by 2030. Specific objectives include:
1. Evaluating the effectiveness of trade facilitation measures proposed in FTP 2023.
2. Assessing the potential of grassroots export promotion and district export hubs.
3. Exploring the impact of promoting merchanting and e-commerce on India’s trade
landscape.
4. Analysing the implications of using INR for international trade transactions.

Review of Literature
To build a comprehensive literature review that would support an analysis of India’s Foreign
Trade Policy (FTP) 2023, one could reference a variety of sources that discuss trade
facilitation, grassroots export promotion, merchanting, e-commerce, and the use of local
currencies in trade settlements. Below are some recommended sources, including articles,
books, and publications that provide a relevant foundation.
1. Trade Facilitation and Digitalization in Trade

- WTO. (2015). *World Trade Report 2015: Speeding up trade – Benefits and challenges of
implementing the WTO Trade Facilitation Agreement*. Geneva: World Trade Organization.
This report by the WTO examines the importance of trade facilitation and the expected
impacts of the Trade Facilitation Agreement, which is relevant to understanding the context
and goals of FTP 2023’s trade facilitation measures.
- Moïsé, E., & Sorescu, S. (2013). *Trade Facilitation Indicators: The Potential Impact of
Trade Facilitation on Developing Countries' Trade. OECD Trade Policy Papers, No. 144. This
OECD paper provides insights into how trade facilitation improvements, including
digitalization, can boost trade in developing countries, with metrics that can be useful for
assessing FTP 2023.
- UNCTAD. (2019). Digital Economy Report 2019: Value Creation and Capture -
Implications for Developing Countries. This report explores the impact of digitalization on
trade, providing insights relevant to FTP 2023’s emphasis on digital transformation and e-
commerce.

2. Grassroots Export Promotion and Inclusive Trade Policies

- Rodrik, D. (2018). *Straight Talk on Trade: Ideas for a Sane World Economy. Princeton
University Press. Rodrik’s work discusses the importance of inclusive trade policies and local
economic development, which ties in with FTP 2023’s grassroots export and district-level
promotion efforts.
-Todaro, M. P., & Smith, S. C. (2020). *Economic Development* (13th ed.). Pearson. This
foundational text in development economics includes discussions on export-led growth,
industrial policy, and the potential for small and medium-sized enterprises to participate in
global markets, aligning with FTP 2023’s objectives.
- Government of India. (2021). One District, One Product (ODOP) Program Report. Ministry
of Commerce and Industry. The ODOP initiative is a key component in India’s approach to
grassroots exports. Reviewing its framework provides context for understanding how district-
level exports are encouraged under FTP 2023.

3. Merchanting and Global Trade Intermediaries

- Felbermayr, G., & Larch, M. (2013). *The Transatlantic Trade and Investment Partnership
(TTIP): Potentials, Problems and Perspectives. International Economics and Economic
Policy, 10(1), 1-16. Although focused on the TTIP, this article provides insights into how
international trade agreements can shape intermediary trade, relevant to India’s merchanting
strategy in FTP 2023.
- Jones, R. W., & Kierzkowski, H. (2001). *Globalization and the Consequences of
International Fragmentation. In R. Dornbusch, G. Calvo, & M. Obstfeld (Eds.), Money,
Capital Mobility, and Trade: Essays in Honor of Robert A. Mundell. MIT Press. This work
delves into international fragmentation and the role of intermediaries, providing a theoretical
basis for understanding merchanting and trade facilitation.

4. E-commerce and Cross-Border Digital Trade

-McKinsey Global Institute. (2016). *Digital Globalization: The New Era of Global Flows.
McKinsey & Company. This report examines the growth of digital globalization and its
impact on cross-border trade, including e-commerce. It offers data and projections that can
support FTP 2023’s e-commerce export goals.
- OECD. (2019). *Measuring the Digital Transformation: A Roadmap for the Future. This
OECD publication provides insights into the digital economy and trade, focusing on the
impact of e-commerce and digital platforms on international trade.
- Chaffey, D. (2019). *Digital Business and E-commerce Management. Pearson. This
textbook covers the fundamentals of digital business and e-commerce, offering strategies and
case studies that align with FTP 2023’s emphasis on cross-border digital trade.

5. Currency Usage in International Trade and Local Currency Settlements

Gopinath, G., & Stein, J. C. (2018). *Banking, Trade, and the Making of a Dominant
Currency. In *Handbook of International Economics, Vol. 5 This chapter provides a deep dive
into the economics of dominant currencies, making it relevant for understanding India’s push
for INR in international trade settlements.

-Kenen, P. B. (2002). The International Financial Architecture. Cambridge University Press.

Kenen’s work addresses the role of local currencies in international finance and the
challenges faced by developing countries in promoting their currencies for trade.
- Reserve Bank of India. (2022). *Guidelines on Settlement of Trade in Indian Rupee (INR).
RBI Report. This document outlines the guidelines from RBI for using INR in international
trade, which is directly related to the policy measures in FTP 2023.

6. General Trade Policy and Economic Growth Literature

-Krugman, P. R., & Obstfeld, M. (2021). *International Economics: Theory and Policy* (11th
ed.). Pearson. This is a standard text on international trade theory and policy, providing
foundational knowledge on trade facilitation, comparative advantage, and export-driven
growth.
- Bhagwati, J. (2004). In Défense of Globalization. Oxford University Press. Bhagwati’s
analysis of globalization’s benefits includes arguments for trade liberalization and facilitation,
relevant to the aims of FTP 2023.
-India Brand Equity Foundation (IBEF). (2023). *Annual Report on India’s Trade and Export
Promotion Initiatives. IBEF. This report includes an overview of India’s trade initiatives,
providing context and statistics that can help assess FTP 2023’s anticipated impact on
exports.
These sources would provide a solid theoretical and empirical foundation for an analysis of
India’s FTP 2023, helping to frame the policy’s innovative approaches within broader
discussions on trade facilitation, inclusive trade policies, digital commerce, and currency
usage in international trade.

Hypothesis
-H1: FTP 2023’s digitalization and trade facilitation measures will significantly reduce
export-related costs and time.
-H2: Grassroots export promotion and district-level hubs will lead to a measurable increase in
India’s export volume.
- H3: Merchanting and e-commerce initiatives will open new markets and increase foreign
exchange earnings.
- H4: Increased use of INR in trade will reduce currency volatility risks and contribute to
INR’s recognition as a stable trade currency.

Research Methodology
The study adopts a mixed-methods approach:
1. **Qualitative Analysis: Conducted through a review of FTP 2023 documents, government
reports, and expert opinions to assess policy provisions and anticipated impacts.
2. Quantitative Analysis: Uses trade data from FY21/22 and FY22/23 to analyse trends in
merchandise and services exports, with projections for export growth under FTP 2023.
3. Case Studies: Comparative analysis of district-level export hubs, e-commerce growth, and
INR-based trade with countries like Malaysia and Sri Lanka to evaluate policy impact.

Research Design
This study is designed as a longitudinal policy analysis, tracking the progress of FTP 2023
implementation over time. Data will be collected from government reports, trade statistics,
and stakeholder interviews. The study will analyse pre- and post-policy trends to determine
the efficacy of FTP 2023 in addressing trade challenges and meeting export goals. Statistical
tools will be employed to assess correlations between policy measures and export growth,
while qualitative insights will enhance understanding of challenges and opportunities within
the policy framework

Introduction

India’s latest Foreign Trade Policy (FTP) 2023, unveiled on 31 March 20231, marks a
significant update to the country’s trade framework, succeeding the previous FTP (2015-
2020). The older policy was extended after its expiration in 2020 as India, like much of the
world, grappled with the impacts of the COVID-19 pandemic. With global supply chains
disrupted, economies had to adapt, and India's government chose to continue with the
existing policy to maintain stability during uncertain times. However, as the post-pandemic
era took shape, the need for a more forward-looking and resilient trade policy became
evident, leading to the development of the FTP 2023.
The new policy, effective from 1 April 2023, introduces a fresh approach to India's trade
vision, aiming to adapt to global shifts while boosting the country’s economic and export
growth. One of the main goals of the FTP 2023 is to achieve an export target of USD 2
trillion by 2030, split equally between goods and services. To realize this vision, the policy
emphasizes the simplification of export procedures, the enhancement of digitization, and the
promotion of Indian products in international markets. It also aims to encourage Indian
businesses to integrate with global supply chains more seamlessly.
Additionally, FTP 2023 seeks to nurture small and medium-sized enterprises (SMEs) by
simplifying compliance requirements, making it easier for them to participate in global trade.
By doing so, it is hoped that the policy will contribute to India’s ambitious goals for
sustainable and inclusive economic growth, supporting India’s aspirations of becoming a
global trade powerhouse in the coming decade.

Economic Context
India’s Foreign Trade Policy (FTP) 2023, launched on 31 March 2023, has brought new
momentum to the country’s vision for international trade, replacing the extended FTP 2015-
2020. This policy comes at a pivotal time, as India’s trade performance has shown strong
growth in both goods and services. As India continues to expand its role in the global market,
the policy sets an ambitious roadmap for reaching USD 2 trillion in combined exports by
2030. To achieve this, FTP 2023 focuses on creating an enabling environment for exporters,
1
Foreign Trade Policy-2023; Government of India, Ministry of Commerce and Industry,
Department of Commerce.
enhancing ease of doing business, and supporting strategic sectors to increase India’s share in
global trade. India’s aggregate merchandise trade crossed the landmark of US$1 billion
(S$1.3 billion) in FY21/22 (April 2021-March 2022). The trade looks well poised to cross the
landmark in FY22/23 as well. During the first 10 months of FY22/23 (April 2022-January
2023), the overall merchandise trade was estimated at US$972 million (S$1292 million),
comprising US$372 million (S$494 million) of exports and US$602 million (S$800 million)
of imports.2 Exports have grown at an annual rate of 9.3 per cent during FY22/23, while
imports grew by nearly 22 per cent in the same period. The growth rates underline strong
global demand for Indian merchandise exports. At the same time, the robust growth in
imports points to the heavy domestic demand from Indian industry and consumers.
India’s aggregate merchandise trade exceeded USD 1 trillion in the fiscal year 2021-2022
(FY21/22), a significant achievement reflecting increased global demand for Indian goods.
This upward trend continued into the fiscal year 2022-2023 (FY22/23), with merchandise
trade estimated at USD 972 billion in the first 10 months (April 2022-January 2023),
comprising USD 372 billion in exports and USD 602 billion in imports. Exports grew at an
annual rate of 9.3 percent in this period, while imports rose by nearly 22 percent, highlighting
strong domestic demand from Indian industry and consumers.
In addition to merchandise trade, India’s services trade has also been impressive. Services
trade in FY22/23 reached USD 417 billion in the first 10 months, already surpassing FY21/22
levels. Services exports, valued at USD 267.8 billion, far exceeded services imports of USD
149.5 billion. Services exports grew by 29.8 percent, while imports rose by 25.9 percent
during the same period, demonstrating the resilience of India’s services sector, especially in
areas like IT, business process outsourcing, and engineering services.
With combined goods and services exports estimated at around USD 640 billion for the first
10 months of FY22/23, FTP 2023 is optimistic that India will reach a milestone of USD 750
billion in exports by the end of the fiscal year. This confidence is rooted in India’s strong
economic fundamentals, diverse export base, and a policy environment that encourages
growth despite global uncertainties.
Along with merchandise trade, FY21/22 and FY22/23 have been good years for the Indian
services trade as well. India’s overall trade in services was US$417 million (S$554 million)
during the first 10 months of FY22/23.3 The trade in FY22/23 so far has already surpassed
that in FY21/22, estimated at US$401 million (S$533 million). Unlike India’s trade in goods,
where imports far exceed exports, India’s trade in services has services exports exceeding
services imports. During FY22/23, services exports were worth US$267.8 million (S$356
million) while services imports were worth US$149.5 million (S$198 million). Services
exports in FY22/23 grew at an impressive rate of 29.8 per cent while imports grew by 25.9
per cent in the same period.

2
Monitoring Dashboard, Merchandise Trade, Government of India, Ministry of Commerce
and Industry, Department of Commerce.
3
Ibid.
The new FTP expresses the confidence that combined Indian exports (goods and services)
will reach the milestone of US$750 million (S$997 million) in FY22/23.4 For the first 10
months of FY22/23, combined goods and services exports are estimated at around US$640
million (S$851 million). The optimism of combined exports hitting US$750 million (S$997
million) comes from the faith in the abilities of both goods and services exports to maintain
their current robust growth rates, notwithstanding uncertain global headwinds generated by
complicated geopolitics. The confidence in goods and services exports continuing to grow at
robust rates is outlined in the vision that the country’s combined exports will reach US$2
trillion (S$2.6 trillion) by 2030.5
The FTP aims to provide a conducive ecosystem enabling goods and services exports to keep
growing at fast rates. The core elements of this ecosystem, as proposed by the policy, include
meaningful trade facilitation, accelerating grassroots exports, identifying new growth avenues
for exports like merchanting and e-commerce and promoting use of Indian Rupee (INR) in
settling trade.
FTP 2023 is structured around ambitious targets and a comprehensive set of measures to
support exporters. The primary objectives include achieving a USD 2 trillion export target by
2030, building resilience in the trade ecosystem, and creating new opportunities for sectors
with high export potential. The key areas of focus are:

Objectives and vision of FTP 2023

Trade Facilitation and Regulatory Simplification

FTP 2023 aims to simplify export and import procedures, reduce paperwork, and digitize
processes, making it easier for businesses to operate. Streamlining customs procedures and
integrating with digital platforms like the ICEGATE (Indian Customs Electronic
Commerce/Electronic Data Interchange Gateway) have been identified as priorities. The
simplification of export documentation and faster clearance processes will allow businesses,
particularly small and medium-sized enterprises (SMEs), to operate more efficiently in global
markets.
Promotion of Grassroots and District-Level Exports

FTP 2023 emphasizes the role of grassroots and district-level exports, promoting the concept
of "One District, One Product" (ODOP) to support specialized products from various
districts. By providing targeted support to these local industries, the policy aims to make
exports more inclusive and leverage unique regional products for global markets. Grassroots
exports have the potential to boost local economies, create jobs, and promote traditional

4
Foreword by Commerce and Industries Minister; Director General of Foreign Trade (DGT),
Ministry of Commerce & Industry, Government of India,
5
‘Foreign Trade Policy 2023.India unveils FTP 2023, eyes $2 trillion exports by 2023’, The
Hindu Business Line, 31 March 2023.
industries, such as handicrafts, textiles, and agro - products, which have been India’s
strengths.

New Export Growth Avenues: Merchanting, E-commerce, and Trade in the Indian Rupee

FTP 2023 identifies emerging opportunities in areas like merchanting, e-commerce, and using
the Indian Rupee (INR) for international trade settlements.
Merchanting: Merchanting trade, where Indian businesses buy goods from one country and
sell them to another without physically importing them into India, is promoted as a new
avenue for export growth. This model can increase foreign exchange earnings and diversify
export markets without additional logistical constraints.
E-commerce Exports: Recognizing the rapid growth of e-commerce, the FTP encourages
Indian businesses to expand their reach through online platforms. By simplifying regulations
and customs procedures for e-commerce exports, the policy aims to make it easier for small
businesses and artisans to sell their products globally. This sector holds potential for products
like handicrafts, apparel, and specialty foods, which have a large demand among overseas
consumers.
Use of Indian Rupee in Trade: Another innovative feature of FTP 2023 is the promotion of
the Indian Rupee as a trade currency. This step aims to reduce dependence on foreign
currencies, lower transaction costs, and increase the stability of trade transactions. Trading in
the INR is expected to benefit India’s trade partners who have limited access to foreign
exchange and want a stable currency alternative for transactions.

Digitization and Data-Driven Policies

FTP 2023 focuses on making India’s trade infrastructure more data-driven and digitally
integrated. The adoption of blockchain, artificial intelligence, and machine learning is
encouraged to enhance transparency, optimize supply chains, and improve trade forecasting.
Digital trade platforms will help exporters connect with buyers, track shipments, and access
credit, reducing costs and increasing competitiveness. The government plans to use data
analytics to identify growth trends, study international market demands, and develop
strategies to capture new markets.

Support for Key Sectors: Manufacturing, Services, and MSMEs

Manufacturing and services are pillars of India’s export economy, with MSMEs forming the
backbone of these sectors. FTP 2023 provides targeted support for MSMEs by offering
simplified regulatory compliance, increased access to export credit, and training programs to
help these businesses understand global markets and standards.

Manufacturing Sector: The policy aims to boost manufacturing exports by promoting sectors
like engineering, pharmaceuticals, textiles, and automobiles, which already have a significant
global footprint. Incentives such as the Production Linked Incentive (PLI) scheme are also
aligned with FTP 2023’s goals to increase India’s manufacturing output and global
competitiveness.

Services Sector: India’s services sector has been a strong performer, especially in areas like
IT, financial services, healthcare, and education. FTP 2023 encourages expansion in these
sectors by simplifying visa regulations, offering financial incentives for skill development,
and promoting collaborations with foreign partners. Given that services exports already
exceed imports, this sector holds enormous potential for creating jobs and enhancing India’s
export revenue.

The FTP and a New Ecosystem

Trade Facilitation

Trade facilitation is a major objective of the FTP with specific goals. The latter include
granting online approvals within a day to a variety of permissions required by exporters;
reducing application fees for medium, small and micro-enterprise (MSME) exporters for the
advance authorisation (AA) and export promotion of capital goods (EPCG) schemes;
revamping e-Certificate of Origin (COO); and paperless filing of export obligation discharge
applications.6
Going digital has been the mantra behind the declared trade facilitation goals. The benefits of
moving to digital processes for faster on-border clearance of goods are undisputed. India is a
signatory of the World Trade Organization’s multilateral Trade Facilitation Agreement. Over
the last few years, it has been working on cutting border red tape and associated costs for
exporters by focusing on improving customs clearances and logistics efficiency. Digitalising
processes, particularly for documentation and invoicing, have been the key enabler in this
regard.
The FTP aims to take digitalisation further. By granting automatic online approval for various
permissions, such as AA and EPCG issuances, revalidating existing authorisations and
extending export obligations within a day, as put down in the FTP, will significantly cut time
for obtaining approvals. The lengths of the cuts are from three to seven days, and, in some
cases, such as extension of export obligation, even up to 30 days, underpinning significant
6
Foreign Trade Policy-2023; Government of India, Ministry of Commerce and Industry,
Department of Commerce, op. cit.
efficiency gains.7 On the other hand, issuing a COO will speed up obtaining preferential tariff
treatment by exporters in other countries and would reduce carbon footprints by minimising
the use of paper.

Grassroots Exports

India’s recent efforts to increase overall goods exports include identifying the prospect of
exports from districts of the country. The efforts appear to be yielding results with the sharp
increase noted in goods exports during FY21/22 and FY22/23.
The new FTP aims to further strengthen the emphasis by developing districts as export hubs
and preparing district-specific action plans. This will require building capacities to identify
potential exports and enhance their prospects for global markets. The FTP underlines the
intention of the central trade and export regulating agency – the Directorate General of
Foreign Trade (DGFT) – to work with states and districts to achieve this objective.

Merchanting, E-commerce and Greater Use of Indian Rupee

Merchanting is a novel element of the FTP. The FTP mentions “Merchanting trade involving
shipment of goods from one foreign country to another without touching Indian ports;
involving an Indian intermediary is allowed subject to compliance with RBI [Reserve Bank
of India] guidelines, except for goods/items in the CITES and SCOMET list.”8
The ostensible objective behind encouraging merchanting is to promote India as an
intermediate trading hub. Large traders, alluded to as merchant exporters, and distinct from
manufacturing exporters who produce locally and export, will benefit from the policy. They
would particularly benefit from trading in goods that are prohibited as exports from
India.9 Locations like the Gujarat International Finance Tec-City stand to benefit from the
announcement if large global traders set up trading facilities for engaging in merchanting.
The FTP’s emphasis on e-commerce signals the commitment of the government to encourage
India’s exports through cross-border digital trade. India’s digital trade with the rest of the
world has grown fast, with the outbreak of COVID-19 acting as an accelerator. Several
MSMEs have become major sources of products for large online retailers like Amazon,
Flipkart, Alibaba, Myntra, Nykaa and Snapdeal. Creating national e-commerce export hubs
with top-class warehousing facilities and involving post offices and the national postal
service network in the drive to expand e-commerce exports can significantly impact the
export prospects of many MSMEs selling globally through online platforms.
7
Ibid
8
Foreign Trade Policy 2023. Government of India, Ministry of Commerce and Industry,
Department of Commerce, p. 18, The CITES is the Convention on International Trade in
Endangered Species of Wild Flora and Fauna and SCOMET refers to special chemicals,
organisms, materials, equipment and technologies.
9
‘Export curbs: ‘merchanting’ may aid traders’, The Times of India, 8 April 2023
Encouraging “Invoicing, payment and settlement of exports and imports”10 in INR has been a
notable aspect of the FTP. Such transactions will be through Special Rupee Vostro Accounts
(SRVA), maintained by exporters and importers in authorised Indian banks and their
corresponding banks in partner countries, according to guidelines issued by the RBI.11
There are two important implications of India’s trade being settled in INR. As noted during
the recent announcement declaring India and Malaysia’s decision to settle trade in INR,
traders from both countries will be spared the difficulty of converting their local currencies to
the United States (US) dollar, if they trade in INR. The SRVAs for India-Malaysia trade will
be maintained by the Union Bank of India and its corresponding partner bank, the India
International Bank of Malaysia.12 Besides avoiding costs of converting to the US dollar,
which has become significant for traders after the hardening of the US dollar in the aftermath
of the Ukraine crisis, more trade invoiced in INR will pave the way for INR’s gradual
acceptance as a global currency for trade.
India's Foreign Trade Policy (FTP) 2023, launched on 31 March 2023, seeks to propel the
country into a new phase of trade growth, with ambitious targets and an emphasis on
technological efficiency, inclusivity, and sustainability. The policy focuses on fostering an
enabling trade environment for exporters, encouraging grassroots participation in
international trade, promoting digitalization in trade processes, and enhancing the use of the
Indian Rupee (INR) in international settlements. This vision is part of India’s roadmap toward
achieving USD 2 trillion in exports by 2030, representing a balance of both goods and
services exports.
To meet these ambitious goals, FTP 2023 has outlined specific objectives for trade
facilitation, grassroots exports, merchanting, e-commerce, and INR invoicing. These
initiatives are designed to create a competitive edge for India in the global marketplace while
promoting inclusivity by making trade more accessible to smaller enterprises and local-level
producers. Each of these objectives underpins India’s overarching vision of becoming a major
player in the global trade landscape.
Trade Facilitation: A Major Objective of FTP 2023
Trade facilitation is central to FTP 2023, with goals focused on reducing bottlenecks and
enabling faster, more efficient trade. The FTP introduces measures for digitalizing and
simplifying export-related processes, including granting online approvals within a day for
various permissions, reducing application fees for MSME exporters, revamping the e-
Certificate of Origin (COO) process, and implementing paperless filing of export obligation
discharge applications.
The move to digitize these processes aims to streamline border procedures, reduce red tape,
and cut costs for exporters, enhancing competitiveness. As a signatory of the World Trade
Organization’s Trade Facilitation Agreement, India has committed to reducing barriers at its
borders and has made steady progress in recent years by focusing on logistics efficiency,

10
Foreign Trade Policy 2023. Government of India, Ministry of Commerce and Industry,
Department of Commerce, op. cit., p. 20.
11
Amitendu Palit, ‘International Trade Settlement Mechanism in the Indian Rupee: Benefits
and Implications’, ISAS Brief no. 947, 19 July 2022.
12
India, Malaysia move beyond dollar to settle trade in INR’, The Hindu, 1 April 2023
reducing clearance times, and cutting down on the paperwork associated with exports and
imports. FTP 2023 expands on these efforts by targeting specific authorizations and
permissions that are often seen as cumbersome for exporters, such as the Advance
Authorization (AA) and Export Promotion Capital Goods (EPCG) schemes.

Digital Transformation in Trade Facilitation

Digitalization is at the heart of FTP 2023’s trade facilitation goals, as faster, more efficient
processes mean smoother on-border clearance of goods and quicker turnarounds for
businesses. Digitization benefits exporters by significantly reducing the time needed for
obtaining approvals for licenses and authorizations. For example, under the new FTP, certain
approvals that previously took three to seven days can now be granted within a day through
automated online systems. In some cases, like export obligation extensions, the reduction in
processing time can be as long as 30 days.
The e-Certificate of Origin (COO) is a key element in facilitating preferential tariff treatment
for Indian goods in other countries. By digitizing the issuance of COOs, India aims to
accelerate access to favorable trade terms for exporters while minimizing the environmental
impact of paper-based processes. This shift aligns with India’s commitment to sustainable
trade practices and will help exporters take full advantage of existing trade agreements and
regional trade deals by obtaining tariff benefits more efficiently.
Grassroots Exports: Promoting District-Level Participation
FTP 2023 also places a strong emphasis on grassroots exports, recognizing the potential of
India’s diverse regional and local industries. The policy seeks to develop districts as export
hubs, with district-specific action plans to support localized products and encourage their
participation in global markets. This approach aligns with India’s “One District, One
Product” (ODOP) initiative, which aims to harness the unique strengths of each district, from
textiles and handicrafts to agro-products and specialty goods.
To foster grassroots exports, the Directorate General of Foreign Trade (DGFT) will work
closely with state and district-level authorities. Together, they will identify local products
with strong export potential and create an ecosystem that supports these exports through
training, financial assistance, and simplified compliance requirements. This initiative could
greatly benefit MSMEs, which form the backbone of India’s rural and semi-urban economy.
For example, the promotion of district-level products such as Pochampally Ikat sarees from
Telangana or Bhagalpur silk from Bihar can open up new markets internationally, leading to
job creation and income generation at the local level.
The increase in goods exports observed in recent years suggests that these initiatives are
already starting to yield results. By focusing on district-level exports, FTP 2023 aims to
ensure that India’s trade growth is inclusive, benefiting smaller businesses and helping them
integrate into global value chains.
Merchanting: Building India as an Intermediate Trading Hub
Merchanting, or trade in goods between two foreign countries without these goods physically
entering the exporting country, is an innovative element in FTP 2023. Merchanting allows
Indian businesses to act as intermediaries in international trade, facilitating the flow of goods
between two foreign markets. Under FTP 2023, merchanting is permitted as long as it
adheres to Reserve Bank of India (RBI) guidelines and does not include items prohibited
from export, such as those on the CITES and SCOMET lists (sensitive or restricted items).
The inclusion of merchanting in India’s trade strategy aims to position the country as an
international trade hub, potentially attracting global traders and financial firms looking to
conduct high-volume international business. Locations such as the Gujarat International
Finance Tec-City (GIFT City) could benefit from this initiative by becoming bases for
international merchant trading activities. By encouraging merchant exporters (distinct from
manufacturing exporters) to use India as a base, the policy may contribute to foreign
exchange earnings and enable India to develop its presence in intermediate trade. This
approach also allows India to participate in trade of goods it does not produce or export
directly, opening new revenue streams without putting pressure on domestic resources or
infrastructure.
E-commerce: Boosting Cross-Border Digital Trade
The rise of e-commerce has transformed global trade, and FTP 2023 seeks to leverage this
trend by promoting e-commerce as a growth driver for Indian exports. The COVID-19
pandemic accelerated the adoption of e-commerce worldwide, and India’s digital trade with
other countries has surged as a result. Many MSMEs have become prominent suppliers for
major online retailers like Amazon, Flipkart, Alibaba, Myntra, Nykaa, and Snapdeal. These
platforms offer smaller businesses a cost-effective and accessible pathway to reach
international markets.
To support e-commerce exports, FTP 2023 encourages the establishment of national e-
commerce export hubs equipped with advanced warehousing facilities. These hubs aim to
streamline logistics for small businesses by providing them with resources for order
fulfilment, packaging, and international shipping. Additionally, the government plans to
involve India’s postal service network in this initiative, using post offices to facilitate e-
commerce exports and reach remote areas, which could enhance accessibility for rural
MSMEs.
Creating infrastructure that supports e-commerce exports will empower MSMEs to
participate more fully in international trade, expanding their reach beyond local and national
markets. By simplifying regulatory requirements, reducing barriers to cross-border
transactions, and providing the logistical backbone needed to support high-volume e-
commerce exports, FTP 2023 aims to make e-commerce a key contributor to India’s trade
growth.
Invoicing in Indian Rupee (INR): Reducing Dependency on Foreign Currencies
One of the notable features of FTP 2023 is the encouragement of trade invoicing, payment,
and settlement in INR. In international trade, the use of INR can offer advantages such as
reduced foreign exchange costs, improved stability in transactions, and enhanced resilience
against currency volatility. India has taken steps to facilitate INR-denominated trade by
allowing Special Rupee Vostro Accounts (SRVA), which Indian exporters and importers can
use for settlements through authorized banks.
The use of INR for international trade has several implications. For instance, trade between
India and Malaysia can now be settled directly in INR, as announced by the Union Bank of
India in partnership with the India International Bank of Malaysia. This arrangement spares
traders the cost and complexity of converting their local currencies to the US dollar, a
particularly relevant advantage given the strong dollar in the post-Ukraine crisis environment.
Besides providing relief to traders, the increased use of INR in international trade could
gradually pave the way for INR’s acceptance as a global trade currency. Over time, this could
strengthen the INR’s status in international finance, reduce India’s dependence on foreign
currency reserves, and enhance the country’s economic sovereignty.

Strategic Integration of Digital and Sustainable Practices

FTP 2023 emphasizes digital transformation and sustainability as cornerstones of India’s
trade policy. Digital platforms, including blockchain and AI-driven solutions, are being
encouraged to optimize trade operations, improve transparency, and streamline
documentation. The adoption of these technologies will not only expedite processes but also
provide Indian businesses with access to real-time data, enabling better decision-making and
increased competitiveness.
In addition, the FTP promotes sustainable practices by encouraging businesses to minimize
their carbon footprint, adopt renewable energy, and align with global environmental
standards. This sustainable approach is designed to make Indian exports more attractive in
markets with stringent environmental requirements, particularly in the European Union and
North America, where sustainability is a key consideration in trade policies. Aligning with
these global standards will enhance India’s image as a responsible trading partner, opening
doors to new export markets and helping Indian companies compete on sustainability metrics.

Addressing Challenges and Building Resilience

While FTP 2023 lays down a comprehensive strategy, India faces several challenges in
realizing its trade goals. Key challenges include global economic uncertainties, infrastructure
bottlenecks, market access issues, and compliance with evolving global standards.
1. Global Economic Uncertainties: Global trade remains subject to economic and
geopolitical pressures, including inflation, supply chain disruptions, and trade
tensions. By focusing on diversification and resilience, FTP 2023 attempts to mitigate
these challenges and ensure steady export growth.
2. Infrastructure and Logistics Development: India’s trade potential is limited by
infrastructure constraints, including port connectivity, road networks, and
warehousing. FTP 2023 aligns with other government programs, like the PM Gati
Shakti

Overcoming Challenges and Leveraging Opportunities

While FTP 2023 is a comprehensive policy with a long-term vision, its success will depend
on how effectively it addresses certain challenges:
Global Economic Uncertainties and Geopolitical Tensions: Global trade is affected by
uncertainties such as inflation, recession fears, and geopolitical tensions, including the
Russia-Ukraine conflict. These factors can disrupt supply chains and impact demand for
Indian exports. FTP 2023’s emphasis on diversification and resilience is a proactive measure
to mitigate these risks.
Infrastructure and Logistics Development: India’s trade potential is limited by infrastructure
bottlenecks, especially in port connectivity, road networks, and warehousing. FTP 2023
aligns with other government initiatives like the PM Gati Shakti – National Master Plan for
infrastructure to improve connectivity and reduce logistics costs. These improvements are
crucial for timely and cost-effective exports.
Market Diversification and Free Trade Agreements (FTAs): The policy focuses on
diversifying export markets and negotiating FTAs with key trade partners to reduce tariffs
and gain preferential access. India has been actively negotiating FTAs with countries such as
the United Kingdom, Canada, and the European Union, which could open new markets and
increase competitiveness for Indian exporters.
Environmental and Social Standards Compliance: Global buyers are increasingly focusing on
environmentally sustainable and socially responsible sourcing. FTP 2023 encourages Indian
exporters to adopt green practices, renewable energy, and ethical labour standards to align
with international norms. Compliance with these standards can enhance India’s image as a
responsible exporter and attract global buyers who prioritize sustainability.
Leveraging Digital Economy and Innovation: In the digital era, India’s growing IT prowess
and startup ecosystem offer new opportunities. By supporting digital innovation and
promoting e-commerce, FTP 2023 positions India to capture the demand for tech-enabled
products and services. Digital transformation can make exports more efficient and help
businesses adapt to changing global trade dynamics.

Looking Ahead

Effective trade facilitation is essential for enabling Indian exporters to improve their
efficiencies and take advantage of the various FTAs that India has already signed or is
negotiating. The emphasis also connects well to India’s ongoing engagement with the Indo-
Pacific Economic Framework for Prosperity,13 which is working on trade facilitation,
including digitalising cross-border operational processes, logistics and transportation issues.
Advancing effective trade facilitation requires ensuring that digitalising of border processes

13
The Indo-Pacific Economic Framework for Prosperity comprises Australia, Brunei, Fiji,
Korea, Malaysia, New Zealand, Japan, India, Indonesia, Philippines, Singapore, Thailand,
USA, and Vietnam. The framework is negotiating rules for the bloc across four pillars: trade,
supply chains, clean economy, and fair economy.
and functions are aligned with similar efforts behind borders.14 Exporters will continue to face
difficulties if, despite on-border clearances being provided online in quick time, other
domestic processes remain cumbersome. This would mean that even if costs for border
clearances come down through the initiatives announced by the FTP, internal procedural costs
will remain high. Similar discrepancies between digitally enabled expeditious trade
facilitation at the border and lengthy domestic business procedures might affect the ease with
which Indian exporters can use cross-border digital signatures, establish digital business
identities, and engage in cross-border interoperable digital payments.
The big push on promoting exports from districts and encouraging the emergence of district
export hubs should firmly embed exports as a key objective in state industrial policies.
However, realising the export potentiality of the districts will require raising awareness about
benefits that local producers, particularly MSMEs, could obtain by producing for the global
market. Grassroots awareness in this regard is limited. If the DGFT, as proposed in the FTP,
can work in close coordination with states and local authorities in raising awareness and
building capacities necessary for selling in global markets, then Indian exports will diversify
and flourish. Inter-agency coordination, however, has traditionally been a weak spot in
India’s economic governance. The success achieved by the DGFT and state agencies in
promoting district exports will, therefore, be eagerly watched.
Merchanting, as mentioned earlier, is an innovative aspect of the FTP. This will hasten India’s
entry in global supply chains by providing intermediary facilities for moving goods from one
country to another. The activity, though, is purely intermediary and will not involve any value
addition on part of Indian producers. Much of the success in the growth of merchanting will
depend on facilities that private traders are able to create for utilising the policy. Merchanting
will enable traders to route goods from India that are prohibited as exports due to concerns
over maintaining optimal domestic supplies or other policy restrictions. Global traders of
these commodities (for example, agricultural products like wheat) operating from India will
no longer be hampered by their access to domestic supplies.
Achieving a combined export target of US$2 trillion (S$2.6 trillion) by 2030 calls for
sustained high rates of growth in exports. It is heartening to note that the FTP has noted the
importance of e-commerce in this regard. The emphasis on promoting e-commerce needs to
proceed together with on-border trade facilitation involving the digitalisation of processes.
The latter is essential for the growth of e-commerce by cutting down physical delivery time
for exports ordered online.
The option of settling more trade in INR, by the RBI’s own admission, is yet to result in large
volumes. However, more countries are taking an interest in the option with around 18
countries having opened SRVAs till now.15 In the immediate future, settling greater volumes
of trade in INR is likely to be limited to those trade partners of India that are encountering
shortage of foreign exchange reserves and would prefer switching to cheaper alternatives.

14
Amitendu Palit, ‘Trade facilitation a major policy objective for India; world’s fifth largest
economy must adopt TFA+ approach’, Financial Express, 24 March 2023
15
‘Central Banks warning up to Rupee: Deputy Governor’, The Economic Times, 7 April
2023.
India’s South Asian neighbours like Sri Lanka and Bangladesh are strong possibilities in this
regard.16
The FTP is strangely quiet on initiatives to enhance services exports. Indian services exports
have been doing remarkably well. As is evident from the trends mentioned in the beginning
of the paper, in FY22/23, growth in services exports (29.8 per cent) was much higher than
that in goods exports (9.3 per cent). At almost US$270 million (S$359 million), services
exports are now more than 70 per cent of goods exports worth US$372 million (S$494
million). Notwithstanding this impressive performance, the FTP has hardly had much to offer
for services exports by way of encouragement. This is inexplicable, given that the goal of
achieving US$2 trillion (S$2.6 trillion) of exports by 2030 is not possible without a sizeable
contribution from services exports.

.....

References:
[1] Foreign Trade Policy-2023; Government of India, Ministry of Commerce and Industry,
Department of Commerce, https://www.dgft.gov.in/CP/.
[2] Monitoring Dashboard, Merchandise Trade, Government of India, Ministry of
Commerce and Industry, Department of
Commerce, https://dashboard.commerce.gov.in/commercedashboard.aspx.
[3] Ibid.
[4] Foreword by Commerce and Industries Minister; Director General of Foreign Trade
(DGT), Ministry of Commerce & Industry, Government of
India, https://www.dgft.gov.in/CP/.
[5] ‘Foreign Trade Policy 2023.India unveils FTP 2023,eyes $2 trillion exports by 2023’,
The Hindu Business Line, 31 March
2023. https://www.thehindubusinessline.com/economy/piyush-goyal-unveils-foreign-trade-
policy-2023/article66682696.ece.
[6] Foreign Trade Policy-2023; Government of India, Ministry of Commerce and Industry,
Department of Commerce, op. cit.
[7] Ibid.
[8] Foreign Trade Policy 2023. Government of India, Ministry of Commerce and Industry,
Department of Commerce, p. 18, https://www.dgft.gov.in/CP/. The CITES is the Convention
16
‘Bangladesh, Sri Lanka, Malaysia and Egypt Eager to Trade in Rupee’, Maritime Gateway,
8 April 2023
on International Trade in Endangered Species of Wild Flora and Fauna and SCOMET refers
to special chemicals, organisms, materials, equipment and technologies.
[9] ‘Export curbs: ‘merchanting’ may aid traders’, The Times of India, 8 April
2023, https://timesofindia.indiatimes.com/business/india-business/export-curbs-merchanting-
may-aid-traders/articleshow/99330439.cms
[10] Foreign Trade Policy 2023. Government of India, Ministry of Commerce and
Industry, Department of Commerce, op. cit., p. 20.
[11] Amitendu Palit, ‘International Trade Settlement Mechanism in the Indian Rupee:
Benefits and Implications’, ISAS Brief no. 947, 19 July
2022. https://www.isas.nus.edu.sg/papers/international-trade-settlement-mechanism-in-the-
indian-rupee-benefits-and-implications/.
[12] ‘India, Malaysia move beyond dollar to settle trade in INR’, The Hindu, 1 April
2023. https://www.thehindu.com/news/national/india-and-malaysia-announce-trade-in-
indian-rupees/article66687080.ece.
[13] The Indo-Pacific Economic Framework for Prosperity comprises Australia, Brunei,
Fiji, Korea, Malaysia, New Zealand, Japan, India, Indonesia, Philippines, Singapore,
Thailand, USA, and Vietnam. The framework is negotiating rules for the bloc across four
pillars: trade, supply chains, clean economy, and fair economy.
[14] Amitendu Palit, ‘Trade facilitation a major policy objective for India; world’s fifth
largest economy must adopt TFA+ approach’, Financial Express, 24 March
2023, https://www.financialexpress.com/economy/trade-facilitation-a-major-policy-objective-
for-india-worlds-fifth-largest-economy-must-adopt-tfa-approach/3020658/.
[15] ‘Central Banks warning up to Rupee: Deputy Governor’, The Economic Times, 7
April 2023. https://economictimes.indiatimes.com/news/economy/policy/central-banks-
warming-up-to-rupee-deputy-governer/articleshow/99305848.cms?from=mdr.
[16] ‘Bangladesh, Sri Lanka, Malaysia and Egypt Eager to Trade in Rupee’, Maritime
Gateway, 8 April 2023, https://www.maritimegateway.com/bangladesh-sri-lanka-malaysia-
and-egypt-eager-to-trade-in-rupee/.