The use of import trade controls in India began during the early years of the Second World War. Notifications issued under the Defence of India Rules became the foundation of import regulation. The objective was to manage scarce foreign exchange and essential supplies during wartime. Subsequently, the Imports and Exports (Control) Act of 1947 was enacted, granting the government sweeping authority to regulate trade flows. Under this regime, the Reserve Bank of India maintained strict artificial control over foreign exchange rates. High customs duties were imposed on imported goods with the intent to discourage imports and conserve foreign reserves.
These protective measures led to unintended consequences. A flourishing black market for foreign goods emerged, along with widespread smuggling and hawala transactions. Domestic shortages, substandard product quality, and market distortions became pervasive. Indian manufacturers faced reduced competition, which in turn inhibited quality improvement and innovation.
Liberalisation and Reform since 1991
Facing mounting economic challenges, the government initiated liberal reforms in 1991. It became increasingly clear that rigid import restrictions and tightly controlled exchange rates were stifling economic growth. With liberalisation, import licensing was drastically reduced and the rupee became convertible on the current account. Efforts began to enable rupee settlement in international transactions. Customs duties were steadily reduced, converging toward global norms.
Foreign direct investment policy was significantly relaxed, opening India to greater capital inflows. Overseas Direct Investment policies were also streamlined. India’s services sector, especially software and information technology, gained global traction, emerging as a key export pillar.
India embraced its obligations under the World Trade Organisation. In line with WTO rules, quantitative restrictions on imports—especially licensing requirements—were dismantled. According to the current policy framework, exports and imports are to be free except where explicit prohibition, restriction, or exclusive state trading is specified. This shift aligns India with global trade liberalization trends.
WTO Membership and Its Influence
India became a member of the World Trade Organisation on 1 January 1995. The WTO provided a permanent institutional platform for trade negotiations and dispute resolution. Its foundational principles include non‑discrimination, market access, fair competition, and support for development. The most-favoured-nation principle and national treatment obligation require member states to treat all trading partners equally, and domestic and imported products equally once market entry is achieved.
The WTO oversees several agreements relevant to trade policy. These include the Agreement on Trade‑Related Investment Measures (TRIMS), the Agreement on Trade‑Related Aspects of Intellectual Property Rights (TRIPS), the General Agreement on Trade in Services (GATS), and the Trade Policy Review Mechanism. A robust Dispute Settlement Body ensures compliance, addressing issues such as subsidies, tariffs, sanitary and phytosanitary standards, and patent rights.
Export Subsidies and WTO Compliance
The WTO’s Subsidies and Countervailing Measures Agreement restricts export subsidies for countries exceeding USD 1,000 per capita income. India, classified as a developing country, can provide limited, non‑actionable support. To maintain WTO compliance, fiscal incentives tied to export performance were progressively removed. India’s export promotion schemes pivoted toward tax remission models that qualify under WTO rules. The Foreign Trade Policy 2023 especially emphasizes input and output tax remission instead of direct subsidies, aligning with international norms.
India faced a WTO dispute initiated by the United States in March 2018 that challenged elements of the Foreign Trade Policy 2015–2020, particularly export promotion programs and the special economic zone scheme. A WTO panel found these inconsistent with the SCM Agreement. The Indian government contested the findings, and appeal proceedings remain pending.
Legislative Framework: FT(D&R) Act and Rules
The Imports and Exports (Control) Act of 1947 was replaced by the Foreign Trade (Development and Regulation) Act, 1992. This Act empowers the central government to frame foreign trade policy, regulate trade flows, and facilitate imports and exports. The Act has been periodically amended, most recently in August 2010.
Under the Act, the Foreign Trade Regulation Rules of 1993 were promulgated and later updated, while additional orders such as the Exemption Order of 1993—amended in 2017—clarified exemptions for certain categories such as government agencies, diplomats, UN personnel, duty‑free shops, and transshipped goods.
Institutional Architecture and Policy Oversight
The Department of Commerce, under the Ministry of Commerce and Industry, holds primary responsibility for administering foreign trade. It works in close coordination with the customs authorities in the Ministry of Finance and the Reserve Bank of India for foreign exchange matters.
The Board of Trade plays an advisory role in trade policy strategy. Reconstituted in 2019, it is chaired by the Union Commerce and Industry Minister and includes secretaries, trade association leaders, and non‑official members. The Board deliberates on export strategy, promotional efforts, and trade performance, though its large membership has raised questions about operational efficiency.
Policy Interpretation Authority and Structure
The interpretation of Foreign Trade Policy provisions, including those contained in the Handbook of Procedures, appendices, and Aayat Niryat Forms, is vested in the Directorate General of Foreign Trade. Decisions and clarifications issued by DGFT are final and binding on all stakeholders, including customs and tax authorities. To assist in policy interpretation, a Policy Interpretation Committee may be constituted under the chairmanship of DGFT. This committee includes Additional and Joint DGFT officers in policy divisions and other co‑opted representatives from concerned ministries. Applications seeking clarification on policy must be submitted using the designated ANF‑2F form, by the stipulated procedure.
Once a licensing authority or the Policy Interpretation Committee issues a policy interpretation or clarification, it has legal effect and cannot be contradicted by any customs or tax authority. This legal precedent ensures uniform application of policy across regions and transactions, providing certainty to importers and exporters.
Hierarchy of Legal Instruments
In the hierarchy of legal instruments governing foreign trade, the Foreign Trade Policy itself holds superiority over subsidiary tools such as the Handbook of Procedures, public notices, circulars, and procedural guidelines. DGFT cannot amend the policy under the FT(D&R) Act; only the central government may do so via notification in the Official Gazette. Where inconsistencies arise, the policy authority prevails.
The Handbook of Procedures serves as an administrative tool to operationalize the policy’s provisions. It may prescribe process flows, forms, and procedures for compliance. However, if any procedural provision conflicts with the core policy, it may be declared invalid by adjudicatory authorities. This layered framework safeguards the legal integrity of the policy.
Doctrine of Prospective Application
The FT(D&R) Act does not empower the government to amend the Foreign Trade Policy retrospectively. Amendments are only prospective, safeguarding the rights of stakeholders under contracts or licensing arrangements made before policy change.
When import or export policy changes are notified, goods shipped before the effective date are governed by the earlier policy. If an importer has a valid and irrevocable letter of credit in place before the notification, then shipment under that credit may proceed, subject to registration procedures within prescribed timelines. These safeguards prevent sudden changes from affecting already planned or underway trade contracts.
Applicability of General and Specific Provisions
When interpreting policy provisions, specific provisions take precedence over general ones. A section in the policy that explicitly governs a particular transaction or product overrides more general provisions. This ensures clarity and avoids conflict in policy application. It is a fundamental rule of statutory interpretation adopted within the Foreign Trade Policy regulatory practice.
Limits of Promissory Estoppel
The doctrine of promissory estoppel does not apply to the Foreign Trade Policy. The policy may be changed at any time without prior notice or forewarning, and parties cannot rely on previous provisions or manual practices as binding assurances. The Supreme Court of India has confirmed that exporters and importers cannot claim vested rights arising from earlier policy versions when new provisions are notified.
Integrated Legal Regime
Foreign Trade Policy, the Handbook of Procedures, the Customs Act, and the Excise statute form an integrated legal framework. These statutes and procedural documents must be read in harmony. When interpreting customs notifications or rules, authorities must consider the policy context. Courts and tribunals have reinforced this integrated reading, particularly in disputes related to duty exemption schemes, valuation, tariff classification, or export obligations.
Grievance Resolution Mechanism
To address stakeholder concerns, a Standing Grievance Committee operates at both national and regional levels. Headed by DGFT in headquarters and by regional authority heads in field offices, the committee reviews and resolves genuine trade grievances related to the Foreign Trade Policy and its implementation. This mechanism offers a formal platform for exporters, importers, and trade associations to seek relief on interpretation or application issues.
Commodity Classification under ITC (HS) 2022
The import and export policy for each product is determined based on the eight‑digit Harmonised System Nomenclature code as specified in the Import Trade Classification (HS) 2022. The classification schedules, Schedule I for imports and Schedule II for exports, define whether a product is freely importable/exportable, restricted, prohibited, or subject to state trading. Each eight‑digit code reflects tariff and regulatory conditions aligned with the customs tariff structure. The classification is updated periodically and synchronised with revisions in customs duty schedules.
The Directorate General of Foreign Trade issues notifications specifying import/export policy under the ITC (HS) framework. Changes in classification or policy are published with clear identification of affected HS codes and policy status. Exporters and importers refer to the DGFT portal to verify the status of specific items using four-, six-, or eight‑digit HS codes.
Categories of Policy Status
Import policy may designate items as free, restricted, prohibited, or under state trading enterprise control. Most non‑agricultural goods are assigned free import status, with removal of quantitative restrictions. However, some goods, such as agricultural produce, used vehicles, or environmentally hazardous items, remain restricted or prohibited. Exports are generally permitted for most goods unless explicitly restricted or prohibited, as listed in Schedule II.
Restrictions on trade in items such as animal skins, narcotics, drugs, and hazardous materials are permitted under WTO rules. These forms of regulation are intended to safeguard public health, environmental considerations, domestic industry interests, and compliance with international treaties.
State Trading Enterprises
For certain goods, exclusive trading rights are vested in state trading enterprises. Such designation requires all import or export transactions in those products to be conducted through the designated entity. This mechanism allows the government to regulate trade in sensitive or strategic goods. Items falling within this category remain outside the domain of general free trade despite the broader liberalization in policy.
Standard Input‑Output Norms (SION)
The Standard Input‑Output Norms define permissible consumption levels of inputs for products manufactured for export. These norms are critical for duty exemption and remission schemes such as Advance Authorisation and Duty Free Import Authorisation. SION ensures that duty concessions are granted only when inputs conform to these specified norms, minimizing misuse and over-claiming.
SION is updated periodically through DGFT public notices. Where SION does not exist, applicants may approach the Norms Committee for ad hoc approval. Approved norms enable the determination of eligible input quantities and duty remission entitlements for export production.
Integration with Other Regulatory Instruments
Classification under ITC (HS) interacts deeply with customs duty notifications, regulatory controls, and rebate schemes. Customs authorities apply tariff obligations and procedural compliance based on the HS code classification. Duty remission schemes such as the EPCG scheme, duty drawback, RoSCTL, or RoDTEP apply only when classification and normative compliance are satisfied.
Export licensing conditions, quality standards, trade remedies, or specific import restrictions often reference classification. Harmonization ensures that once a product is assigned a certain policy status, it triggers the relevant regulatory, procedural, and subsidy architecture.
Legal Finality of Classification Decisions
Decisions regarding the classification of goods under the ITC (HS) are subject to final interpretation by the DGFT. In cases where ambiguity arises, importers or exporters may seek clarification through the Policy Interpretation Committee. The DGFT’s ruling on HS classification and policy applicability is binding on customs and other authorities. Customs cannot dispute classification or authorisation granted by DGFT unless expressly permitted under policy provisions.
Duty Exemption and Remission Schemes
The Foreign Trade Policy recognizes that WTO rules prohibit direct export performance incentives for countries whose per capita income exceeds USD 1,000. Therefore, it emphasizes duty exemption and remission schemes that align with WTO norms. Schemes such as Advance Authorisation, Duty Free Import Authorisation, Duty Drawback, Rebate on State and Central Taxes and Levies, and Remission of Duties and Taxes on Exported Products play a central role in export facilitation. Advance Authorisation and Duty Free Import Authorisation permit duty‑free import of inputs used in export production, whether consumed or physically incorporated. Duty Drawback reimburses duties paid on imported inputs or excise paid on domestically produced inputs. Tax remission schemes are designed to compensate indirect taxes across the supply chain. The Special Economic Zone, Export Oriented Unit, Electronic Hardware Technology Park, and Biotechnology Park schemes support export production by offering customs duty exemption and operational flexibility. The EPCG scheme and Project Imports Scheme enable capital goods to be imported duty-free for export production. Manufacture in Customs Warehouse allows production within duty‑free bonded warehouses with export obligation. These schemes collectively reduce input costs and improve the competitiveness of Indian exports.
Policy Highlights and Ease of Doing Business Initiatives
Foreign Trade Policy 2023 was notified on 31 March and became effective on 1 April 2023. It marks a paradigm shift from fixed‑term policies to a continuous revision model without a sunset clause. It emphasizes responsiveness to industry feedback, swift procedural updates, and smooth continuity of trade incentives. The shift from export incentives to tax remission reflects WTO compliance. The introduction of online approvals, automatic clearances, paperless filing,, and electronic certification forms a digital, user‑friendly procedural environment. Rupee payment acceptance under authorised schemes aligns with RBI and government policy to promote the Indian rupee globally. The development of new export excellence towns and export‑oriented e‑commerce hubs along with export facilitation centres,, aims to decentralize trade facilitation. Merchanting trade is supported for goods shipped between third countries under Indian intermediation, subject to regulatory compliance. District export hubs are promoted, offering common services, branding, quality control, and logistics support. SCOMET licensing has been streamlined. These policy measures reduce friction, increase transparency, and enhance predictability for exporters and importers.
Growth in Exports
Indian exports of goods and services experienced strong growth over recent years. In FY 2016, exports were approximately USD 435 billion. By FY 2022, exports had increased to USD 676 billion. Projections for FY 2023 suggest exports will cross USD 750 billion. This upward trajectory reflects India’s expanding global trade footprint, increased competitiveness in servic,es especiallyy software and IT, and better integration into global value chains. The alignment of customs and trade policies with global standards and digital facilitation measures has contributed to this expansion.
Administrative Structure and Oversight
Administration of foreign trade policy is overseen by the Department of Commerce under the Ministry of Commerce and Industry. It coordinates with the customs department in the Ministry of Finance and the Reserve Bank of India, which controls foreign exchange aspects. The Director General of Foreign Trade heads the DGFT and advises the central government on policy formulation. A network of regional offices under the Joint Director General of Foreign Trade acts as licensing and facilitation authorities. The Board of Trade, chaired by the Commerce Minister, is reconstituted to deliberate on export strategy, performance, and policy guidance. Export promotion councils, industry bodies, and regional authorities engage through Standing Grievance Committees, which provide formal mechanisms for conflict resolution. DGFT retains the power of review over decisions in subordinate offices or committees and can rectify or revisit authorisations. Regional Authorities administer authorisations, monitor export obligations, and manage procedural compliance. Committees such as the Norms Committee, Policy Interpretation Committee, and Policy Relaxation Committee advise on specific issues, including input-output norms, special requests, and exemptions. The Handbook of Procedures operationalizes policy provisions through digital procedures, public notices, and standard forms. The procedural design emphasizes clarity, transparency, and alignment with core policy.
Legal and Institutional Principles for Policy Administration
Legally, the Foreign Trade Policy holds primacy over the Handbook of Procedures, circulars, and public notices. Amendments to policy must be issued by the central government via official gazette notification. DGFT cannot amend the policy nor act contrary to its provisions. Retrospective changes are not permitted. Transitory provisions apply when policies change, allowing commitments under pre‑existing contracts or letters of credit to proceed under earlier rules. Specific provisions override general ones. The doctrine of promissory estoppel does not apply, which means policy may be altered without notice, and parties cannot claim rights based on earlier versions. A holistic legal framework connects the Foreign Trade Policy, Handbook of Procedures, Customs Act, and Excise laws to form an integrated code. For duty relief, licensing, valuation, or classification issues, us toms authorities must interpret notifications and act in harmony with FTP. Courts and tribunals have ruled that customs authorities cannot contest DGFT decisions or authorisations unless explicitly permitted under legal provisions. Interpretation of policy and classification authority rests with DGFT and its authorised committees, and their views are binding on customs and related parties. This ensures a uniform approach in application across all regions and cases.
Grievance Mechanism and Stakeholder Engagement
To foster fair and efficient policy implementation, grievance committees are established at both headquarters and regional levels. These committees are chaired respectively by the DGFT and regional office heads. They address genuine grievances from trade and industry concerning authorisation delays, interpretation disputes, or implementation challenges. Stakeholders may present issues formally through prescribed formats, after which the committees review and provide resolutions. Policy relaxation requests and norm adjustments can be lodged through specific channels. DGFT engages proactively with trade bodies, export promotion councils, LS, and industry stakeholders to gather feedback and refine policy as needed. Continuous outreach, dialogumemechanismsand digital interfaces aim to reduce friction and enhance stakeholder trust. Despite procedural frameworks, some challenges remain in on-ground coordination and responsiveness.
Binding Interpretation and Customs Compliance
Classification decisions, policy interpretations, and authorisation responsibilities rest irrevocably with DGFT. Customs and other government agencies must respect DGFT rulings on classification, fulfilment of export obligations, or value addition norms. If DGFT determines that input norms or export obligations are met, customs cannot override those determinations. Authorisations issued by DGFT remain valid and enforceable unless officially cancelled by the licensing authority. Customs officers are prohibited from challenging or rejecting valid authorisations except in specified circumstances in law. This gives exporters and importers certainty and legal protection in executing trade transactions.
Conclusion
India’s Foreign Trade Policy 2023 reflects a decisive transition from protectionist trade measures to a structured, WTO‑compliant framework emphasizing facilitation and competitiveness. The early era of licensing controls and high tariffs has given way to a liberalized regime where most imports and exports are permitted by default, subject only to specific prohibitions or restrictions. The continuous policy structure, replacing the five‑year fixed-term model, enables dynamic adaptation to international developments and industry feedback.
The legal architecture under the FT(D&R) Act and its subordinate rules firmly anchors the policy, with clear institutional roles assigned to the central government, DGFT, Board of Tra,,de and regional offices. The DGFT holds exclusive authority on policy interpretation, classification under ITC (HS) 2022, and issuance of authorizations. In turn, customs, excise,,se or other agencies are bound by its rulings. This hierarchy safeguards consistency, avoids duplicative or conflicting directives, and ensures legal clarity.