India's Trade Policy and Export Promotion

India's Trade Policy and Export Promotion

India’s Trade Policy: Constitutional Basis & Objectives

Trade policy is a set of measures adopted by a government to regulate international trade.
Export promotion comprises policy instruments and programmes aimed at increasing the volume and value of a country's exports.

India’s trade policy derives its constitutional authority from Articles 301 to 304 of the Constitution of India, which guarantee freedom of trade, commerce, and intercourse throughout the territory.

💡 Key Insight: This constitutional anchoring gives India’s trade regime a uniquely strong legal foundation compared to many other nations.

Statutory implementation rests on the Foreign Trade (Development and Regulation) Act, 1992 (FTDR Act 1992), empowering the Ministry of Commerce and Industry to issue the Foreign Trade Policy (FTP).

The latest FTP, issued in 2023, delineates sector‑wise export targets, liberalises customs procedures, and aligns export incentives with the Make in India agenda.

Export promotion mechanisms include the Export Promotion Capital Goods (EPCG) Scheme 2022, the Remission of Duties and Taxes on Exported Products (RoDTEP) Scheme 2020, and the Service Export Promotion Scheme (SEPS) 2021, each authorized by the FTDR Act 1992.
These schemes provide duty remission, concessional credit, and tax rebates contingent on compliance with prescribed export performance criteria.

India’s trade policy is not limited to tariff adjustments; it also encompasses non‑tariff measures, export subsidies, and regulatory reforms.
Consequently, trade policy and export promotion together constitute a coordinated framework that shapes external market access, foreign‑exchange earnings, and domestic industrial upgrading.

[!infographic: "Timeline of major trade policy instruments from the 1992 FTDR Act to the 2023 FTP, highlighting the years of the EPCG (2022), RoDTEP (2020), and SEPS (2021) schemes"]<

📋 Classification: Components of India’s Trade Policy Framework

Institutional Framework: Ministries, Councils & Agencies

Article 301 of the Constitution guarantees freedom of trade, commerce and intercourse throughout India; Article 302 permits Parliament to impose restrictions in the public interest; Article 303 empowers the Union to levy export duties, subject to conditions in Article 304. Schedule VII, entries 23 (Foreign Trade) and 24 (Export Duty), confers exclusive legislative competence on Parliament to formulate the Foreign Trade Policy (FTP) and prescribe export duties.

The Foreign Trade (Development and Regulation) Act 1992 (FTDR Act 1992) operationalises Articles 301‑304, authorising the Ministry of Commerce and Industry to issue licences, grant duty remission and regulate export incentives through the Directorate General of Foreign Trade (DGFT).

The Special Economic Zone (SEZ) Act 2005 establishes the SEZ Development Commission, which grants tax holidays, duty exemptions and infrastructure support to units operating within SEZs, thereby augmenting export competitiveness.

[!infographic: "Timeline of major trade‑related legislation in India (1992 FTDR Act → 1995 WTO accession → 1999 FEMA → 2005 SEZ Act → 2017 GST Act)"]<

💡 Key Insight: While Article 301 enshrines free trade, the FTDR Act 1992 and SEZ Act 2005 provide the statutory machinery that translates this constitutional guarantee into concrete export‑promotion incentives.

⚖️ Comparative Analysis: FTDR Act 1992 vs SEZ Act 2005

📋 Classification: Major Regulatory Bodies & Their Roles

[!infographic: "Organizational chart showing the hierarchy: Ministry of Commerce & Industry → DGFT, EPC network, SEZ Development Commission, EXIM Bank, with links to Customs/GST and FEMA"]<

The Supreme Court’s judgment in Mafatlal Industries Ltd. v. Union of India (2005 4 SCC 1) upheld … (section continues as originally written).

Export Promotion Architecture: Incentive Schemes, Licensing Regime & Institutional Flow

The Director General of Foreign Trade (DGFT), a statutory office under the Ministry of Commerce, issues export licences through the Automated Tariff and Trade Repository (ATREX) portal. Licences are granted automatically for items on the “open list” of the Foreign Trade Policy (FTP) 2020‑25; items on the “restricted list” require DGFT approval based on a “no‑objection” certificate from the relevant Export Promotion Council (EPC). DGFT officers are appointed by the Union Cabinet for five‑year terms and may be removed only by the President on the recommendation of the Cabinet Committee on Economic Affairs.

💡 Key Insight: DGFT officers enjoy a high‑level security of tenure (5 years, removal only by President), underscoring the strategic importance of export licensing.

Export Promotion Councils are sector‑specific statutory bodies (e.g., Engineering Export Promotion Council, Gems & Jewellery EPC) created under the Export Promotion Councils Act 1992. Council chairs are senior industry leaders appointed by the Minister of Commerce for three‑year terms, renewable once. Councils advise DGFT on tariff classifications, certify product quality for foreign markets, and allocate subsidies under incentive schemes. As of March 2024, 27 EPCs collectively served 4,800 exporters, representing 68 % of total export value (Ministry of Commerce, EPC Report 2024).

💡 Key Insight: The 27 EPCs, though relatively few, support nearly three‑quarters of India’s export value, highlighting their pivotal role in trade promotion.

⚖️ Comparative Analysis: DGFT vs. Export Promotion Councils

![infographic: "Organizational flowchart showing DGFT at the top, linked to ATREX licensing system, and EPCs feeding advisory inputs and subsidy allocations"]<

The Remission of Duties and Taxes (RoDT) scheme, introduced by FTP 2020‑25, replaces the earlier Merchandise Exports from India Scheme (MEIS). RoDT grants duty remission on inputs used for export of specified goods, capped at 10 % of input cost. In FY 2023‑24, RoDT benefits were awarded to 1,200 firms, amounting to ₹12,000 crore of duty remission (Ministry of Commerce, Export Promotion Report 2024).

💡 Key Insight: RoDT alone delivered ₹12,000 crore in duty remission in a single fiscal year, reflecting its scale as a trade‑boosting instrument.

The Export Promotion Capital Goods (EPCG) scheme permits duty‑free import of capital equipment for exporters whose prior‑year export turnover exceeds ₹5 crore. DGFT granted 1,500 EPCG licences in FY 2022‑23, enabling imports worth $3.2 billion (DGFT Annual Report 2023). Eligibility is verified through audited export statements submitted to the RBI’s Foreign Exchange Management Department.

The Service Export Incentive (SEI) scheme, administered by the Reserve Bank of India (RBI), provides a 5 % cash incentive on net foreign exchange earnings from notified services. RBI disbursed ₹2,800 crore to 1,800 service exporters in FY 2023‑24 (RBI Monetary Policy Report 2024). The scheme covers IT, education, and health services, with a ceiling of $1 billion per exporter.

![infographic: "Timeline showing transition from MEIS to RoDT (2020‑25) and introduction dates of EPCG and SEI schemes"]<

📋 Classification: Export Promotion Instruments

Export‑Oriented Units (EOUs)

The section on EOUs continues below.

Trade Policy Evolution: From Licence Raj to GST Era

India’s post‑independence trade regime began with the 1948 Foreign Trade Policy, which imposed quantitative licensing on most imports and exports, embodying the “Licence Raj” model. The 1957 Industrial Policy shifted focus to import substitution, mandating high tariffs on capital goods and limiting foreign‑exchange allocation. In 1975 the Export Promotion Capital Goods (EPCG) scheme was introduced, allowing duty‑free import of inputs for exporters meeting a 100 % export obligation, thereby incentivising value‑added production.

💡 Key Insight: The EPCG scheme linked duty‑free imports directly to export performance, a pioneering export‑oriented incentive in the pre‑liberalisation era.

The 1995 accession to the World Trade Organization (WTO) required India to dismantle most quantitative restrictions; the WTO Agreement on Trade‑Related Aspects of Intellectual Property Rights (TRIPS) was ratified the same year, obliging India to align patent standards with global norms. The Supreme Court’s decision in Madhav Rao v. Union of India (1995) struck down arbitrary export licensing, reinforcing the WTO‑mandated “most‑favoured‑nation” principle.

A landmark policy shift occurred with the Keshav Dev Malviya Committee (1999), whose recommendations—particularly the expansion of duty‑drawback mechanisms and the formalisation of the EPCG scheme—were incorporated into the Foreign Trade Policy (2000). The 2005 Special Economic Zones Act created a network of SEZs (details omitted here).

The 2015‑2020 Foreign Trade Policy introduced the Merchandise Exports from India Scheme (MEIS) and Service Exports from India Scheme (SEIS), providing duty remission linked to export performance. The 2020‑2025 policy replaced MEIS/SEIS with the Remission of Duties and Taxes (RoDT) scheme, aligning export incentives with WTO commitments and reducing fiscal leakage.

💡 Key Insight: RoDT was explicitly designed to curb fiscal leakage that had plagued earlier duty‑remission schemes.

GST implementation in 2017 eliminated inter‑state tax barriers for exporters; the GST Council’s three‑quarter majority rule now allows a collective veto by states on central GST proposals affecting export‑related inputs. The 2021 amendment to the EPCG scheme extended eligibility to green‑technology inputs, reflecting India’s climate‑linked industrial strategy.

Recent bilateral accords—Japan‑India Comprehensive Economic Partnership Agreement (2023) and the EU‑India Trade and Investment Agreement (under negotiation, 2024)—commit India to further tariff reductions and services market opening. The Export Credit Guarantee Corporation’s 2023 expansion to $10 billion coverage underscores the government’s push to de‑risk export financing.

[!infographic: "Timeline of India’s major trade‑policy milestones from 1948 to 2024, highlighting key legislations, WTO accession, and major incentive schemes"]<

⚖️ Comparative Analysis: Export‑Incentive Schemes (MEIS/SEIS vs RoDT)

📋 Classification: Major Policy Instruments & Their Core Focus

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India's Trade Policy and Export Promotion — Significance

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📊 Quick Reference: India's Trade Policy and Export Promotion

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