• INDIA

    Indirect Tax News - June 2021

Foreign trade policy scheme 2021-2026 postponed

International trade is the lifeblood of any economy, and it has begun to play a significant part in the Indian economy, reflecting the country’s increasing integration with the global market. India’s Foreign Trade Policy (FTP) is a five-year set of guidelines or instructions issued by the central government that lays out policy related to the import and export of goods. The current FTP, announced on 1 April 2015, is an integrated policy that originally was valid until 31 March 2021; the government was expected to unveil FTP 2021-26, but due to the second wave and surge in COVID-19 cases in India, it extended the 2015 FTP through 30 September 2021.

Overall, COVID-19 has had devastating consequences on international trade, with India experiencing a dramatic dip in both exports and imports. Economic recovery will be long and difficult. FTP 2021-26 is expected to take into account input from traders, trade associations, members of parliament and a government-appointed high-level advisory group. Potential areas that will be included in the new policy include WTO-compliant tax incentives, the introduction of “district export hubs” to help make India a USD 5 trillion economy, enhancing e-commerce initiatives by setting up a dedicated e-commerce council, creating e-commerce export zones to promote micro, small and medium-sized enterprises, etc. Efforts of the central and state governments are being synergized to promote exports from all districts as part of the initiative to develop each district as an export hub. Steps that already have been taken to move this initiative forward include the preparation of a state export strategy/policy by all state/union territory governments and the creation of district export action plans.

Comments

Key drivers to achieve India’s goal of being a USD 5 trillion economy by 2025 would include boosting the export of both merchandise and services by systematically addressing domestic and overseas constraints, such as impediments to lowering transactions costs and enhancing the ease of doing business. Meanwhile, we will need to await the government’s announcement of its FTP for the period 2021-2026.

Dinesh Kumar B
[email protected]