Foreign Trade Policy 2023 to focus on boosting exports from districts

Under the new Foreign Trade Policy, the government plans to aid MSMEs in districts by strengthening the Districts as Export Hubs initiative and decentralising export promotion.

Foreign Trade Policy 2023 to focus on boosting exports from districts

Friday April 28, 2023,

8 min Read

For the past three years, Hyderabad-based Sahaja Aharam Producer Company has been trying to export farm produce such as rice, pulses, and spices, but it has encountered several challenges. 

The challenges include a lack of access to capital and lack of awareness regarding government schemes and the high cost of certification for exports. 

“Being a small farmer association, getting funds from anywhere takes a lot of time. We have to depend on banks or NBFCs for loans,” says Prasanna T P, CEO of Sahaja Aharam, a federation of 20 farmer-producer organisations registered under the Companies Act of 2013. 

“A lot of handholding is required at the district level when it comes to government schemes. Information regarding them is hard to get,” he adds. 

But Prasanna thinks all this may change with Foreign Trade Policy 2023, which aims to strengthen exports from districts. He hopes the government will start spreading awareness—at the district level—about the various funding schemes that MSMEs (micro, small and medium enterprises) can avail themselves of and benefit from. 

With the new Foreign Trade Policy, which was announced on March 31 this year, the Government of India attempts to address the issues faced by MSMEs such as Sahaja Aharam and help them access the global market, so that they can contribute significantly to the nation’s exports.

Districts as Export Hubs

Under the new policy, the government plans to aid homegrown businesses by taking forward the Districts as Export Hubs (DEH) initiative and uplifting the export value of districts across the country. 

The Department of Commerce had launched the DEH initiative in 2019, with the government acknowledging that each district has a unique potential to become an export hub. 

Through this initiative, which has now come under the focus of the new Foreign Trade Policy, the Government of India is collaborating with state governments to harness the potential of districts and transform them into export hubs. 

The new policy places emphasis on the execution strategy of the DEH initiative, as the government strives to increase MSMEs' export contributions and boost total exports to $2 trillion by 2030.

Decentralising export promotion

The most significant aspect of the DEH initiative is the creation of institutional mechanisms at the district level—to decentralise export promotion. This will ensure that export action plans are developed at the district level and then moved up to the state or Centre for approval, rather than the other way around.

Before the launch of the DEH initiative, export promotion was handled solely by the central government. There was no mechanism to actively involve the states and districts in the decision-making process regarding the export of local products and services.

According to Vinod Kumar, President, India SME Forum, decentralising export promotion and giving states the freedom to build institutional processes at both the state and the district levels will allow them to strategise with a more nuanced approach. It means that districts will have the power to develop action plans and determine where to invest, he says. 

Towards this end, District Export Promotion Committees (DEPC) are being set up, headed by the district collector, district magistrate, or chief development officer. 

The committees will be co-chaired by DGFT (Directorate General of Foreign Trade) regional authorities. They will also include key district officers of different industries such as agriculture, horticulture, livestock, fisheries, handicraft, and handloom. 

The DEPCs will be in charge of developing and acting on district-wide export action plans. 

The export action plan will identify export-worthy products, the production requirements such as machine setup, and the problems faced by the industry. It will also define the skills and infrastructure required for production. 

Once the plans are in place, DGFT's regional authorities will work with the administration at the district level and discuss the draft district export action plan. On the basis of inputs received from all stakeholders, these plans are adopted by the DEPCs for execution.

“Up until now there was no government body at the ground level, but now the government is trying to bring in a micro-focus on districts,” says Haresh Calcuttawala, Co-founder, TreZix, which is digitising and automating the export-import processes for SMEs.

Testing labs and other plans

As part of the DEH initiative, the government also plans to set up testing labs in each district so that products do not have to be sent to other cities for testing. 

“Testing will be an essential step in determining whether the products meet global standards, and hence establishing these labs in each district will greatly reduce the cost for producers,” says Kumar of India SME Forum. 

In addition, DGFT plans to create an online monitoring platform where DGFT’s regional authorities will be able to share all information regarding the products and services they are working on as well as the progress made in the export action plan. 

There are also plans to prioritise the convergence of multiple schemes so that districts can access the central and state government funds for infrastructure development and skill/capacity building. 

“The step is a good one, but the government would need to bring awareness at the ground level; only then can we benefit from it,” says Prasanna of Sahaja Aharam.

District-specific needs highlighted in the district export action plan will also receive priority under the Department of Commerce programmes, such as Niryat Bandhu and Market Access Initiative. 

“The administrative authorities at the district level will now have the power to allocate funds and resources (from national and state schemes). How fast we are able to do it is what matters,” says Kumar. 

He adds that states such as Maharashtra, West Bengal, Uttar Pradesh, and Madhya Pradesh are already focusing on building an export ecosystem at the grassroot level and taking the DEH initiative forward. 

Product promotion from various districts

As part of the DEH initiative, district-level promotional events, such as buyer-seller meets, trade fairs, and workshops, will be held to considerably boost the discoverability of products from every corner of the country.

Kapil Goel, Founder, Exotic India, says, when the government steps in, products get more publicity and demand is thus created. 

Exotic India collaborates with more than 10,000 artisans from around India to bring their products to a global audience through its ecommerce website.

“We benefitted from the One District One Product (ODOP) initiative. We are likely to benefit from the DEH initiative as well, “ says Goel.  

The ODOP initiative was launched in 2018 by the Uttar Pradesh government to identify, promote, and brand one export-worthy product from each district. Due to its success, it was later adopted by the central government and merged with the DEH initiative in December last year. 

Through the ODOP initiative, Exotic India was able to discover artisans making brass handicrafts from Moradabad and onboard them on its website. 

Goel envisages something similar through the DEH initiative as well.

“It will help integrate the country into one, and the market size for different products will also increase,” he says. 

According to Kumar, the sectors most likely to benefit from DEH are leather, agriculture and food processing, textiles, and handicrafts, which have a huge potential to create jobs. There is also a big demand for textiles and handicrafts globally. 

Suman Sonthalia, the founder of Sahibabad-based Aakriti Art Creations, which sells handicraft, handcrafted furniture, and home décor products, has not prioritised exports till now. She currently exports 25% of her products to countries such as Italy, Malaysia, and Saudi Arabia. 

But now, with the help of the DEH initiative, she intends to expand to more international markets in Europe and the Middle East. 

She hopes for better discoverability of her products with the DEH initiative. “Till now people have contacted me themselves because of the uniqueness of my product. I hope the government helps me when it comes to promoting my product in the global market,” she says.

Other initiatives to aid MSMEs

Focus on logistics

Under Foreign Trade Policy 2023, the government plans to focus on eliminating constraints in infrastructure and logistics, which are hindering exports. 

DGFT's regional authorities will be responsible for identifying logistical requirements in districts across every stage of the value chain—from the producer to the export destination. The focus will be on developing logistics, export connectivity, and other export-oriented ecosystems at the district level. 

Consignment value

The new trade policy proposes to increase the per-consignment value limit for exports made using courier services, from Rs 5 lakh to Rs 10 lakh 

Goel of Exotic India believes this will benefit local artists and artisans and boost the ecommerce sector. 

Collaboration with foreign post offices 

This is expected to enhance cross-border ecommerce and help MSMEs in the hinterland and land-locked regions reach worldwide markets. 

Under this collaboration, an exporter can drop off shipments at any nearby post office. The Department of Post will then transport the export parcels to a foreign post office for customs clearance.

“This will enable merchants to export from places that are traditionally not served by logistical chains,” says Gaurav Mirchandani, Founder of Indore-based SM Toys.

Edited by Swetha Kannan