Trade strategies, India's trade strategy, the Foreign Trade Policy 2023 and the regulation of foreign trade

1. Trade strategies

• Inward-looking strategy (import substitution): protect domestic industry with high tariffs, quotas and licensing so that goods once imported are produced at home. Argued for by Prebisch and Singer and the infant-industry case. Risks: inefficiency, high cost, neglect of exports.
• Outward-looking strategy (export promotion, export-led growth): open trade, realistic exchange rates and incentives for exporters, so that industry grows by selling to the world market. The East Asian economies (Korea, Taiwan, Singapore) followed it.
• Mixed strategy: selective protection with export promotion, which is roughly what most developing countries, including India today, follow.

2. India’s trade strategy

1. 1950–1975: import substitution. The Mahalanobis model of the Second Plan stressed heavy industry; imports were controlled under the Imports and Exports (Control) Act, 1947; export pessimism prevailed.
2. 1975–1990: export promotion within controls. Cash compensatory support, import replenishment licences, the first EPZ (Kandla, 1965) and EOUs (1981), and committees (Alexander 1978, Abid Hussain 1984) recommending liberalisation.
3. 1991 onwards: liberalisation and outward orientation. Devaluation, removal of import licensing for most goods, tariff cuts, current-account convertibility (1994), removal of quantitative restrictions by 2001, five-year EXIM policies from 1992, SEZs from 2000.
4. Since 2015–2020: export promotion with self-reliance. Foreign Trade Policies of 2015 and 2023, Make in India, Atmanirbhar Bharat, PLI schemes, tariff increases on some consumer and electronic goods, and a new wave of free trade agreements.

3. Regulation of foreign trade in India

(a) The Foreign Trade (Development and Regulation) Act, 1992

The principal statute, replacing the 1947 Act. It empowers the Central Government to make provision for development and regulation of foreign trade by facilitating imports and augmenting exports.

• Section 3: the Central Government may prohibit, restrict or regulate imports and exports by order.
• Section 5: power to formulate and announce the Foreign Trade Policy.
• Section 6: the Director General of Foreign Trade (DGFT), under the Ministry of Commerce and Industry, advises on and implements the policy.
• Section 7: no person shall make any import or export except under an Importer-Exporter Code (IEC) number granted by the DGFT. The IEC is a ten-character code, now the same as the firm’s PAN, obtained online.
• Sections 8–9: suspension or cancellation of the IEC, and licences and authorisations.
• Sections 11–14: contravention of the Act or policy attracts penalty and confiscation; appeals lie under section 15.

(b) Other regulating laws and bodies

• Customs Act, 1962 and Customs Tariff Act, 1975: duties, clearance, drawback.
• FEMA, 1999: export proceeds must be realised and repatriated within the period the RBI prescribes; payments for imports through authorised dealer banks.
• GST: exports are zero-rated supplies under the IGST Act, 2017.
• Product-specific laws: the Export (Quality Control and Inspection) Act, 1963 (Export Inspection Council), APEDA Act, 1985, the Marine Products Export Development Authority Act, 1972, the Tea, Coffee, Spices and Rubber Acts.
• SCOMET list: export of special chemicals, organisms, materials, equipment and technologies with possible military use requires authorisation.
• Trade remedies: anti-dumping and safeguard duties recommended by the Directorate General of Trade Remedies.

(c) Regulations an exporter must follow (the January 2026 question)

1. Obtain an IEC from the DGFT.
2. Register with the relevant Export Promotion Council or commodity board and obtain a Registration-cum-Membership Certificate (RCMC), needed for benefits.
3. Register under GST and file under LUT or pay IGST and claim refund.
4. Check that the item is freely exportable under the ITC(HS) classification, or obtain the licence for restricted items.
5. Comply with quality control and pre-shipment inspection where notified.
6. File the shipping bill and clear customs through ICEGATE.
7. Realise payment through an authorised dealer bank under FEMA.

4. The Foreign Trade Policy 2023

Announced on 31 March 2023, in force from 1 April 2023. Unlike earlier five-year policies it has no end date and is updated as needed.

Four pillars: (i) incentive to remission (moving from incentives to remission of duties and taxes, such as RoDTEP); (ii) export promotion through collaboration with exporters, States, districts and Indian missions abroad; (iii) ease of doing business, reduced transaction cost and e-initiatives; and (iv) emerging areas — e-commerce exports, developing districts as export hubs, and streamlining SCOMET.

Main features:

• Target of USD 2 trillion of exports of goods and services by 2030.
• Districts as Export Hubs: district export action plans.
• Towns of Export Excellence: new towns added for handlooms, handicrafts, carpets.
• Status holders with lower thresholds (see the note on export houses).
• E-commerce exports facilitated, with courier export limits raised.
• Continued schemes: Advance Authorisation, EPCG, duty drawback, RoDTEP, EOU/SEZ.
• Settlement of trade in Indian rupees, to internationalise the rupee.
• A one-time Amnesty Scheme for defaults in export obligation under EPCG and Advance Authorisation.
• Paperless, online processing of applications by the DGFT.

5. Evaluation of India’s policies

Achievements: exports and trade much larger since 1991, a strong services surplus, growth of electronics exports, simpler procedures, digital processing.

Shortcomings: persistent merchandise trade deficit; India’s share in world merchandise exports remains small; high logistics costs; export incentives challenged at the WTO (a WTO panel in 2019, on a US complaint, found MEIS and the export-linked SEZ and EOU benefits inconsistent with the Subsidies Agreement; India appealed, and replaced MEIS with RoDTEP); frequent policy changes; and dependence on imported inputs.

How this is examined

For regulation, open with the 1992 Act and its sections, then the other laws, then the exporter’s checklist. For FTP 2023 (or a question naming the “EXIM policy”, the old name for the same thing), give the date, the four pillars, eight features and a short evaluation. The WTO side of export subsidies is in the note on subsidies and countervailing measures.