Foreign Trade Policy (FTP) 2023

The Foreign Trade Policy (FTP) 2023 is the Government of India's main rulebook for exports and imports. It decides which goods can be freely traded, which need a licence, and what help the government gives to exporters. It came into force on 1 April 2023. Its big goal is to raise India's total exports of goods and services to US$ 2 trillion by 2030.

Why does a country need a trade policy?

Exports bring foreign currency (like US dollars) into the country. India needs this currency to pay for things it imports, such as crude oil, electronics and gold. Exports also create jobs, especially in sectors like textiles, leather, gems and engineering goods. But Indian exporters face tough competition from countries like China, Vietnam and Bangladesh. A clear trade policy tells exporters the rules, cuts paperwork, and gives them support so their goods can compete on price.

Where does the power come from?

The FTP is made under Section 5 of the Foreign Trade (Development and Regulation) Act, 1992 (FTDR Act). This section allows the Central Government to make and change the export-import policy by notification. The 1992 Act replaced the older Imports and Exports (Control) Act, 1947, which came from an era of tight controls. The Directorate General of Foreign Trade (DGFT), under the Ministry of Commerce and Industry, advises on the policy and carries it out.

The DGFT also issues the Handbook of Procedures (the step-by-step guide) and the Appendices (detailed lists, like the RoDTEP rate lists in Appendix 4R and 4RE).

How did India's trade policy change over time?

• Before 1991, India followed import substitution: making things at home and keeping imports out with high taxes and licences.
• After the 1991 reforms, India opened up. Trade policies were called EXIM Policies and usually ran for five years.
• From 2004, the name changed to Foreign Trade Policy: FTP 2004–09, FTP 2009–14 and FTP 2015–20.
• FTP 2015–20 introduced the MEIS scheme, and was extended several times (partly because of COVID-19) until 31 March 2023.
• FTP 2023 was announced on 31 March 2023. Unlike earlier policies, it has no end date. It will be updated whenever needed, so that exporters do not face sudden changes every five years.

The four pillars of FTP 2023

1. Incentive to remission: moving away from cash-like rewards (which break global trade rules) towards refunding taxes that exporters have actually paid. RoDTEP is the main example.
2. Export promotion through collaboration: working with exporters, states, districts and Indian embassies abroad.
3. Ease of doing business: less paperwork, lower transaction costs and more online, automatic approvals.
4. Emerging areas: e-commerce exports, developing districts as export hubs, and clearer rules for exporting sensitive dual-use items (SCOMET).

Key tools under the FTP (what help exporters get)

These are the main schemes a student should know:

• Advance Authorisation (AA): lets an exporter import raw materials duty-free, if they are used to make goods that will be exported. Example: a garment exporter imports special fabric without paying customs duty, stitches shirts and exports them. The exporter must add at least 15% value in India, and must complete the exports within 18 months. The imported material cannot be sold to others (the "actual user" condition).
• Export Promotion Capital Goods (EPCG): lets an exporter import machinery duty-free. In return, the exporter must export goods worth six times the duty saved, within six years.
• RoDTEP: refunds hidden taxes (like duty on fuel used in transport, electricity duty and mandi tax) that are built into the cost of export goods.
• Duty drawback: refunds the customs and excise duties paid on inputs used in export goods. (It is run by the Ministry of Finance under the Customs Act.)
• Export Oriented Units (EOUs): a scheme from 1981 that lets a unit anywhere in India work mainly for export with duty benefits.
• Status holders: exporters are given "star" ratings based on their export value. FTP 2023 lowered the thresholds so more small exporters can qualify (for example, Two Star now needs ₹15 crore, down from ₹25 crore).
• Towns of Export Excellence (TEE): towns that export a lot of a product get extra support. FTP 2023 added Faridabad, Mirzapur, Moradabad and Varanasi, taking the total to 43.
• Districts as Export Hubs: each district identifies its export products, and plans are made at the district level.
• E-commerce: the value limit for courier exports was raised from ₹5 lakh to ₹10 lakh per consignment.
• Rupee trade: the policy allows international trade to be settled in Indian rupees, to reduce dependence on the US dollar.
• Amnesty scheme: a one-time scheme for exporters who could not meet their export promises under AA and EPCG, letting them settle cases by paying the duty with lower interest.

How does it link with other export support?

In 2025, the government approved an Export Promotion Mission (EPM) with an outlay of ₹25,060 crore for FY 2025–26 to FY 2030–31. It has two parts: Niryat Protsahan (money-related help, like cheaper export credit) and Niryat Disha (non-money help, like testing, branding, trade fairs and logistics). The DGFT runs it on one digital platform.

India's position in numbers

In FY 2025–26, India's total exports of goods and services were estimated at about US$ 860 billion (goods about US$ 442 billion and services about US$ 418 billion). To reach US$ 2 trillion by 2030, exports must grow much faster than they have in recent years.

Commonly confused concepts

• FTP vs Customs Act: The FTP (under the FTDR Act, 1992) decides what can be traded and what incentives exporters get. The Customs Act, 1962 decides how much duty is charged and how goods are checked at ports.
• DGFT vs CBIC: DGFT (Commerce Ministry) makes and runs the trade policy. CBIC (Central Board of Indirect Taxes and Customs, Finance Ministry) collects customs duty and GST.
• Advance Authorisation vs EPCG: AA is for duty-free raw materials (inputs). EPCG is for duty-free machines (capital goods).
• RoDTEP vs Duty Drawback: Duty drawback refunds customs duty on inputs. RoDTEP refunds other hidden taxes not covered by drawback or GST refunds.
• SEZ vs EOU: An SEZ is a whole area, set up under the SEZ Act, 2005, treated as foreign territory for customs. An EOU is a single unit that can be set up anywhere in India.
• Remission vs subsidy: Remission is giving back taxes the exporter has actually paid (allowed by global trade rules). A subsidy linked to exports is extra money on top (generally banned).

Issues, criticism and the way forward

• Short extensions create uncertainty: Schemes like RoDTEP are often extended for only a few months at a time. Exporters say they cannot price long-term orders when they do not know if benefits will continue.
• Low rates and budget limits: RoDTEP rates are often below the actual hidden taxes paid, because the scheme works within a fixed budget.
• Global rules: Every incentive must fit World Trade Organization (WTO) rules. India lost a WTO case on older schemes like MEIS in 2019.
• Ambitious target: Many economists see the US$ 2 trillion goal by 2030 as very hard, given slow world trade and rising protectionism (countries raising import barriers).
• Structural problems: high logistics costs, delays in refunds, and the small size of most Indian exporting firms.
• Way forward: experts suggest bringing petroleum products and electricity under GST (so taxes can be refunded through GST itself), longer and predictable scheme timelines, cheaper export credit, and more trade agreements with large markets.

Concepts to Know

• Tariff line: A detailed product category in the customs list, identified by a number code (for example, an 8-digit code for "cotton T-shirts").
• Value addition: The extra value created in India while turning imported inputs into a final product. If imported cloth costs ₹100 and the exported shirt sells for ₹120, the value addition is about 17%.
• Export obligation: A promise an exporter makes to export a certain value of goods in a fixed time, in return for a duty benefit.
• Domestic Tariff Area (DTA): All of India outside SEZs, where normal tax rules apply.
• Dual-use items (SCOMET): Goods and technologies that have both civilian and military uses, such as certain chemicals or software. SCOMET stands for Special Chemicals, Organisms, Materials, Equipment and Technologies, and exporting them needs a licence.
• Protectionism: When countries put high import taxes or other barriers on foreign goods to protect their own industries.