The Department of Commerce announced the extension of the existing foreign trade policy by six months. The reason for this development is currency volatility and global uncertainty. The ministry said, the geopolitical situation is not suited to a long-term foreign trade policy.
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What the ministry said:
The Department of Commerce said “Existing Foreign Trade Policy Extended for Six Months Due to Currency Volatility and Global Uncertainty. The geopolitical situation is not suited to a long-term foreign trade policy. Previously, the government extended the due date of the 2015-20 Foreign Trade Policy to September 30, 2022.
Why the delay:
Currently, fears of a recession in major economies like the United States and Europe caused panic among investors. Foreign investors began pulling their money out of stocks as the bears took control. Along with outflows of foreign funds, geopolitical tension in Ukraine combined with inflationary pressures and tighter monetary policy, forced a further weakening of the rupiah against the US dollar. US currency hits 22-year highwhile the rupiah hit a new all-time low of 81.6 against the greenback.
Foreign Trade Policy Need:
Foreign trade policy provides a framework for increasing exports of goods and services as well as job creation and increased value addition in the country. It aims to support both the manufacturing and service sectors, with a particular focus on improving the ease of doing business. Between April and August 2022, India’s merchandise exports amounted to $192.59 billion up 17.12% from $164.44 billion in the same period a year ago. Imports continue to grow more than exports. In the first five months of FY23, merchandise imports increased by 45.64% to $317.81 billion, compared to $218.22 billion for the corresponding period last year. The trade deficit more than doubled to $125.22 billion (April-August 2022) from $53.78 billion in the same period last year.
Earlier this month, Trade Minister Piyush Goyal held a meeting focused on setting export targets, new foreign trade policy (FTP) (2022-27), and strategies and measures to advance domestic manufacturing and exports. At the meeting, the Board of Trade advised the government on policy measures related to foreign trade policy to achieve the goals of boosting Indian trade.