India’s New Foreign Trade Policy (2021-2026) unveils on 1st April 2021

Published: 30-01-2021

“The FTP (2015-2020) had projected India’s share in global exports to increase from 2% in 2015 to 3.5% in 2020. The need to increase our merchandise exports stems from the need to address employment, which, in turn, affects private consumption or demand, which is so necessary for meeting the development targets of reducing poverty and inequalities. In the overall macro framework, net exports boost aggregate demand for goods produced domestically with wide multiplier effects that cover investments, production processes/technology, infrastructure and support services (logistics).”

The Goal

The New Foreign Trade Policy of India (2021-2026) is announced to be effective from 1st April 2021. It strives at making India a leader in international trade. The goal behind the formulation of this policy is to transform India into a 5 trillion USD economy by 2024. This policy is still under the phrasing and framing phase and aims at directing the collaborative effect of merchandise and services exports with employment generation and growth-oriented moves.

Key emphasis points of New Foreign Trade Policy

• Pushing exports (including service and merchandise)
• Districts Export Hub to play a major role
• Domestic manufacturing & service sector boost the operational part of by providing the required infrastructural back-up and support
• Facilitate business by balancing the above
• Reformation in the regulatory and working structure
• Decrease in transactional cost by employing efficient use and logical infrastructure

Developmental snapshots

• Structural framework implementation - Various rounds of meetings held with the collaborators in December 2020
• Additionally, rounds of meetings were held between Industry associations, Chamber of Commerce and Export Promotion Councils to get their views and expert advice
• The Parliamentary Consultative Committee of the Ministry of Commerce and Industry had organized a meeting on this subject on 12th January 2021 chaired by the Minister of State for Commerce and Industry Mr. Hardeep Singh Puri, and attended by Members of Parliament (MPs) and senior officers of the ministry

Major trading partners of India

Bangladesh, UK, USA, Bhutan, UAE, Switzerland, Saudi Arabia, Israel, Nepal, Singapore, Hong-Kong, Germany, Iraq are the major trading partners of India

Growth Projections

The International Monetary Fund has projected a growth rate of 11.5% for India in 2021. So given India achieves this required growth rate and stretches a little beyond that to 12%, then from 2018-19 (2.7 trillion USD) ,the milestone figure of 5 trillion USD can be achieved by 2024.

Challenges to be overcome

Though achievement of the 5 trillion USD figure up to 2024-25 is a challenging one, but it is realizable according to our Honorable Finance Minister of India. The existing challenges of India being;

• Underemployment
• Declining agricultural activities
• Funding and export matters
• Slow-footed pace of infrastructural development

Taking into consideration, a close focal point connection between production/productivity and export growth, policy frame and instruments should aid in balancing the structural hurdles.

Sources

• https://www.tpci.in/indiabusinesstrade/blogs/foreign-trade-policy-2021-26-productivity-technology-and-sustainability
  Foreign Trade Policy 2021-26: Productivity, technology and sustainability by Dr. Sunitha Raju | January 26, 2021
• https://www.business-standard.com/article/economy-policy/new-foreign-trade-policy-2021-2026-to-be-rolled-out-from-april-says-govt-121011300117_1.html#:~:text=Union%20Ministry%20of%20Commerce%20and,a%20leader%20in%20international%20trade
• https://www.gktoday.in/current-affairs/new-foreign-trade-policy/#What_is_the_goal_of_New_Foreign_Trade_Policy