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India’s Foreign Trade Policy is a framework that guides how the country manages imports and exports. It sets clear rules to support trade, improve export competitiveness, and maintain a stable balance of payments. Foreign trade plays an important role in economic growth by creating jobs, earning foreign exchange, and strengthening ties with global markets.
India trades a wide range of goods and services with many countries, making a structured policy essential. The policy is formulated by the Directorate General of Foreign Trade under the Ministry of Commerce and Industry and is updated to respond to changing global and domestic trade conditions.
Key Takeaways
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FTP has evolved from fixed five-year plans to a flexible, open-ended approach from 2023.
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₹4,531 crore MAS scheme implemented in January 2026 to support exporter diversification and market access.
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RoDTEP has been extended until March 31, 2026, under Foreign Trade Policy support measures to refund embedded taxes and reduce exporter costs.
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The long-term export target under the policy is set at $2 trillion by 2030.
What is the Foreign Trade Policy?
The foreign trade policy, or FTP, is a set of rules, regulations, and procedures that aim to create a favourable balance of payments situation by regulating imports and enhancing exports. The policy is formulated by the Directorate General of Foreign Trade (DGFT), an agency under the Ministry of Commerce and Industry.
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Objectives of the Foreign Trade Policy of India
Although multiple FTPs have been enacted through the years, the objectives are largely the same. Here’s a quick overview of some of the key objectives of foreign trade policies.
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Boost exports of goods and services to other countries.
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Increase jobs and other economic chances by improving exports.
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Enhance industrial growth by providing incentives to exporters.
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Diversify the range of goods and services being exported to reduce dependence on just a few sectors.
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Make exporters more competitive in the global market by reducing their costs and helping improve their efficiency.
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Increase foreign exchange reserves and improve the country’s balance of trade and balance of payments situation.
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Encourage the adoption of new and cutting-edge technologies and innovations.
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Understanding the Progress of India’s Foreign Trade Policy
The foreign trade policy first came into effect on April 01, 1992. It was referred to as the Export-Import (EXIM) policy back then. Designed to be a five-year plan from 1992 to 1997, the first EXIM policy was primarily focused on three things: liberalisation, privatisation, and globalisation.
The second five-year EXIM policy was introduced on April 01, 1997, and was in effect till the year 2002. The primary aim of the second policy was to attain an export target of $90 to 100 billion by the end of the year 2000 (as stated at the time of policy formulation).
The third five-year policy was for the period from 2004 to 2009. This was when the government of India renamed the EXIM policy as Foreign Trade Policy (FTP). The main objective was to double the share of India’s trade with the world by the end of the five-year policy period.
The fourth FTP policy lasted from 2009 to 2014, closely following the global financial crisis of 2008. Spurred by India’s resilience during the crisis, the five-year policy contained measures to provide support to sectors that were affected by the global recession and to attain an average annual export growth rate of 25% over the policy period.
The fifth foreign trade policy was enacted in 2015 and was in effect till 2020. The policy contained several new initiatives aimed at providing support to both the service and manufacturing sectors, with a special focus on enhancing the ease of doing business in India. One of the objectives was to increase the country’s exports to $900 billion by the year 2019–2020 (as stated during the policy period).
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Highlights and Objectives of the Foreign Trade Policy
The onset of the COVID-19 pandemic sent ripples through the world, threatening to upend the economic progress of India and various other countries. However, India proved its resilience once again by bouncing back from new lows faster than most developing and developed nations.
To ensure that the stellar economic progress continued, the sixth foreign trade policy was unveiled by the Ministry of Commerce and Industry. The policy came into effect on April 01, 2023. However, unlike the previous FTP policies, the Foreign Trade Policy 2023 is not a five-year plan but rather an open-ended policy with mechanisms to adjust and adapt to challenges that emerge.
First Foreign Trade Policy of India
The first formal foreign trade policy of India was introduced in 1992 after economic reforms aimed at opening the economy to global markets. Known then as the Export-Import (EXIM) Policy, it marked a shift from strict controls to a more open and regulated trade system.
The policy focused on reducing import restrictions, encouraging exports, and simplifying trade procedures. It also provided incentives to exporters to improve competitiveness. This phase laid the foundation for a structured approach to what is foreign trade policy in India, setting clear rules to balance trade growth with economic stability.
New Foreign Trade Policy Approach
The new foreign trade policy approach marks a shift in how India manages international trade. Instead of fixed time frames, the policy is designed to remain flexible and responsive to changing global conditions. It focuses more on tax remission rather than direct incentives, helping exporters reduce costs in a transparent way. Technology plays a key role by simplifying procedures, reducing paperwork, and improving coordination between exporters, states, and districts.
The new foreign trade policy also gives attention to emerging areas such as e-commerce exports and controlled trade items, while aligning India’s trade framework with international standards. This approach supports steady export growth without adding regulatory complexity.
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Impact of Foreign Trade Policy on Imports
The Foreign Trade Policy has a direct impact on how imports are managed in India. The policy simplifies import-related documentation by encouraging digital filing and automated processes. This helps reduce processing time and makes customs clearance more efficient, leading to faster cargo release at ports.
At the same time, the policy places certain limits to maintain regulatory control. For example, importing gifts through post or courier is restricted, including items ordered from online platforms. Exceptions are allowed only for specific cases such as life-saving medicines and rakhi, as per notified rules.
Overall, the policy aims to balance ease of imports with compliance requirements. By streamlining procedures and setting clear conditions, it supports smoother trade operations while maintaining oversight.
Key Features of Foreign Trade Policy
India's new foreign trade policy focuses on making trade procedures simpler, more transparent, and easier to comply with. The policy places strong emphasis on digital processes, export support, and district-level participation to strengthen India’s trade ecosystem.
Process re-engineering and automation
The policy prioritises the use of digital systems to reduce paperwork and manual processes. Automated approvals and online filings help shorten processing time and lower compliance effort for exporters. Existing export-related schemes continue with simplified procedures to improve access, especially for smaller exporters.
Towns of export excellence
Certain towns are identified based on their export potential in specific products such as handicrafts, handlooms, and carpets. These towns receive focused support to improve infrastructure, market access, and export capacity, helping local industries reach global markets.
Recognition of exporters
Exporters are recognised based on performance and contribution to trade growth. Recognised exporters are encouraged to take part in capacity-building and skill development initiatives, which support the creation of a more skilled export workforce.
Promoting exports from the districts
The policy promotes exports at the district level by identifying local products with export potential. Coordination between state and district authorities helps address local challenges and strengthen supply chains.
Streamlining SCOMET policy
Clearer procedures are introduced for items covered under SCOMET to ensure compliance with international commitments. This allows controlled exports while maintaining regulatory clarity.
Facilitating e-commerce exports
Simplified rules and dedicated facilitation centres support small exporters, artisans, and MSMEs in accessing international markets through e-commerce.
Other facilitation measures
Provisions related to capital goods imports, advance authorisation, merchanting trade, and a one-time amnesty mechanism aim to reduce compliance burden and resolve pending obligations.
The Foreign Trade Policy Has Been Designed Around Four Pillars
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Incentive to remission
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Export promotion through collaboration - exporters, states, districts, and Indian missions
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Ease of doing business, reduction in transaction cost, and e-initiatives
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Emerging Areas E-Commerce Developing Districts as Export Hubs and streamlining SCOMET policy
One of the primary objectives of the 2023 policy is to enhance India’s exports to $2 trillion by 2030. Some of the key highlights of the new foreign trade policy of India have been listed below.
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Improve exporters’ competitiveness by reducing their costs through a wide range of incentives like duty drawbacks, advance authorisation schemes, export promotion capital goods (EPCG) schemes, and free-trade agreements (FTAs).
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Encourage collaboration between exporters, states, districts, and Indian missions in foreign countries to identify the various challenges and formulate unique strategies to overcome them.
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Increase the ease of doing business factor by reducing paperwork and documentation for export processes.
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Focus on emerging export areas with good growth potential, like pharmaceuticals, e-commerce, and high-tech manufacturing.
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Categorise four new small towns - Mirzapur, Faridabad, Varanas,i and Moradabad as Towns of Export Excellence (TEE) and provide them with multi-faceted assistance to boost exports.
Conclusion
India owes its growth as a major trade player in the world to all of the foreign trade policies enacted over the years. Considering the ever-evolving nature of challenges, the introduction of the dynamic and open-ended Foreign Trade Policy 2023 is a welcome step that can help the country quickly adapt and power through the world trade landscape. If implemented effectively, the policy can strengthen India’s position in global trade over time.
