Foreign Trade Policy

Indian Economy glossary

Also called: FTP, FTP 2023 · Topic: International Trade Policy, WTO and Intellectual Property · NCERT: Beyond NCERT

Meaning

The Foreign Trade Policy (FTP) is the Union government's rulebook for India's exports and imports. The Department of Commerce issues it under the Foreign Trade (Development and Regulation) Act, 1992, and the DGFT (Directorate General of Foreign Trade) runs it. It decides which goods may be traded freely, which need permission and which are banned. It also sets out export-support schemes and the transitional rules that apply when a policy changes. The current policy is FTP 2023. It came into force on 1 April 2023 and has no end date. Earlier FTPs ran for fixed periods.

It matters because the FTP is the main tool India uses to push exports and to control imports and exports. More and more, it is also used as industrial policy, meaning a tool to build up domestic industry.

Explanation

How it works: export and import policy categories

  • Every good is identified by its ITC(HS) code. This is India's tariff-line classification of goods, based on the international Harmonised System.
  • Each code is given an export or import policy status. There are three export policy categories: Free, Restricted and Prohibited.
  • Free: anyone can export the good. No permission is needed.
  • Restricted: the good can be exported only under a licence or authorisation from DGFT.

  • Prohibited: the good cannot be exported at all.

  • DGFT notifications change a good's status. One notification can move a good from one category to another without rewriting the whole policy.

  • Transitional arrangements (Para 1.05, FTP 2023): when a rule becomes stricter, shipments already committed before the change get some protection. This keeps exporters from being caught halfway through a deal.
  • DGFT also keeps India's SCOMET list (Special Chemicals, Organisms, Materials, Equipment and Technologies). These are dual-use goods, meaning goods with both civilian and military uses, so their export is controlled.

FTP 2023: what changed

  • From incentives to remission:
  • An incentive scheme pays a reward for exporting. An example is the old MEIS. WTO rules treat this as a banned export subsidy.
  • A remission scheme only gives back taxes and duties that are already hidden inside the export price. This keeps exports "zero-rated", meaning domestic taxes are not exported along with the goods.
  • RoDTEP (Remission of Duties and Taxes on Exported Products) refunds these embedded taxes and duties for exports in general.
  • RoSCTL (Rebate of State and Central Taxes and Levies) does the same for apparel and made-ups. Both schemes date from 2021.

  • Older remission tools follow the same logic. Duty drawback refunds customs duty paid on imported inputs used in exports, and Advance Authorisation lets exporters import those inputs duty-free.

  • Districts as export hubs: exports are planned from the district level upward, not only through big ports and cities.

  • E-commerce exports: there is support for small sellers who export online.
  • Target: US$2 trillion of exports by 2030.
  • No sunset date: the policy is open-ended and is updated through notifications. Earlier FTPs had to be replaced at the end of each fixed period.

Why the shift happened: the WTO push

  • Annex VII of the WTO's SCM Agreement allowed poorer countries to keep giving export subsidies. India crossed the income threshold and "graduated" out of Annex VII (WTO notification 2017).
  • The US then challenged MEIS, SEZ, EOU and EPCG schemes in the case DS541. A WTO panel ruled against India in October 2019. India appealed "into the void": the WTO's Appellate Body (its appeals court) does not work, so the ruling stays frozen.
  • India replaced these incentive schemes with the WTO-compatible RoDTEP and RoSCTL (2021). FTP 2023 builds on that remission approach.

What makes the policy tighten or loosen

  • Domestic supply worries lead to export curbs on items such as rice and onions. In practice these curbs are often export duties.
  • Feedstock and industrial-policy goals also lead to curbs. Feedstock is the raw input a domestic industry processes. Example: in November 2026, export of Li-ion battery Black Mass was moved from Free to Prohibited.
  • Strategic and security goals lead to controls through SCOMET.
  • WTO rules and FTAs (free trade agreements) push the other way, towards fewer barriers and support that the WTO allows.

In India

  • Law: the Foreign Trade (Development and Regulation) Act, 1992 is the parent law. The FTP is issued under it.
  • Institutions:
  • Department of Commerce: makes the policy.
  • DGFT: carries it out. It issues notifications, licences and authorisations, and manages SCOMET.
  • Customs and the Finance Ministry: collect tariffs under the Customs Tariff Act 1975. This is separate from the FTP.

  • DGTR (2018): investigates trade-remedy cases such as anti-dumping. This is also separate from the FTP.

  • Recent use as industrial policy: Black Mass ban

  • Black Mass is the powder left after shredding end-of-life Li-ion batteries. It contains lithium, cobalt, nickel and manganese.
  • DGFT Notification No. 49/2026-27 (10 November 2026) moved ITC(HS) 85491400 Black Mass from "Free" to "Prohibited", effective immediately and "until further orders".
  • Para 1.05 of FTP 2023 applies to shipments already in progress.
  • It works alongside the ₹1,500 crore Incentive Scheme for Critical Mineral Recycling (Cabinet, September 2025).

  • The chain runs like this:

    • the export ban keeps feedstock inside India;
    • domestic recyclers run closer to full capacity;
    • India depends less on imported critical minerals.

  • Scale of trade: India's goods and services trade is about 45–50% of GDP (verify current), up from about 15% in 1990–91.

Don't confuse with

  • Customs tariff / Customs Tariff Act 1975: tariffs (taxes on imports) are set and notified by the Finance Ministry. The FTP, run by Commerce/DGFT, decides whether and on what terms a good can be traded, through Free, Restricted or Prohibited status and export schemes.
  • DGTR vs DGFT: DGTR (2018) investigates dumping, subsidies and import surges, and recommends duties. DGFT runs the FTP and changes a good's export or import status.
  • Restricted vs Prohibited: a Restricted good can still be exported with a DGFT licence. A Prohibited good cannot be exported at all.
  • MEIS (incentive) vs RoDTEP (remission): MEIS rewarded exporters with extra money and was ruled against in DS541 (2019). RoDTEP only refunds taxes already embedded in exports, so it fits WTO rules.

Prelims Hooks

  • FTP 2023 came into force on 1 April 2023 and has no end date. It targets US$2 trillion of exports by 2030.
  • The FTP is issued by the Department of Commerce and carried out by DGFT under the FT(D&R) Act, 1992. It is not issued by the Finance Ministry.
  • DGFT's export policy categories are Free / Restricted / Prohibited. The transitional arrangements are in Para 1.05 of FTP 2023.
  • RoDTEP covers exports in general and RoSCTL covers apparel and made-ups. Both are remission schemes, introduced in 2021 to replace the WTO-challenged incentives (DS541, panel ruling October 2019).
  • SCOMET, India's national list of dual-use goods under export control, is run by DGFT.
  • Trap: the Black Mass export ban (Notification No. 49/2026-27, 10 November 2026, ITC(HS) 85491400) was issued by DGFT, not by the Ministry of Mines or MoEFCC.

Mains Points

  • Remission vs subsidy under WTO rules:
  • After graduating from Annex VII (2017) and losing DS541 (2019), India could no longer pay exporters rewards.
  • FTP 2023 instead competes by removing taxes embedded in exports (RoDTEP, RoSCTL) and by making trade easier (district hubs, e-commerce).

  • The debate: can India reach US$2 trillion of exports without direct subsidies?

  • FTP as industrial policy:

  • The Black Mass ban keeps feedstock at home for critical-mineral recycling.
  • The risk: if domestic refining capacity is not ready yet, export bans can push down domestic prices and hurt the businesses that collect spent batteries.

  • Such bans can also face WTO questions about export restrictions.

  • Open trade vs "new protectionism":

  • FTP 2023 is export-focused.
  • At the same time, India has raised tariffs step by step since Budget 2018-19 and issued quality control orders.
  • A GS-III answer can weigh infant-industry support against the old captive-market problem of the import-substitution era. In that era, protected firms had no reason to improve quality.

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