Foreign Trade Policy, the WTO and India's Trade Agreements

India's trade: the big picture

Total trade: India's goods and services trade together exceeded $1.7 trillion in 2024–25.

• Merchandise exports: about $437 billion.
• Services exports: about $387 billion.
• Total exports: a record of about $825 billion.

Main export items: engineering goods, petroleum products, electronics (especially smartphones, now among the top export items thanks to PLI), gems and jewellery, pharmaceuticals, rice, and textiles.

Main imports: crude oil, electronics, gold, coal, machinery and fertilisers.

Main partners:

• the United States, the largest export market and a source of trade surplus;
• China, the largest source of imports and India's biggest bilateral trade deficit, close to $100 billion;
• the UAE;
• the EU.

India's share of world merchandise exports is only about 1.8%, but it is about 4.3% of world services exports (WTO, 2024).

Foreign Trade Policy (FTP)

• Legal basis: issued under the Foreign Trade (Development and Regulation) Act 1992.
• Administered by: the Directorate General of Foreign Trade (DGFT), under the Ministry of Commerce.
• Foreign Trade Policy 2023: effective from 1 April 2023. It has no end date and is updated as needed. Its aim is $2 trillion of exports by 2030.

Pillars of FTP 2023:

1. Incentive to remission: a shift from subsidy-type incentives (challenged at the WTO) to duty remission schemes such as RoDTEP and RoSCTL.
2. Export promotion through collaboration: with states, districts and Indian missions. Districts as Export Hubs builds on ODOP.
3. Ease of doing business: paperless and automatic approvals.
4. Emerging areas: e-commerce exports, dual-use high-end technology items (SCOMET), and rupee trade settlement.

Key schemes:

• RoDTEP (Remission of Duties and Taxes on Exported Products, January 2021): it replaced MEIS, which a WTO panel (2019) found to be a prohibited export subsidy in a dispute brought by the US.
• EPCG (Export Promotion Capital Goods): duty-free capital goods import against an export obligation.
• Advance Authorisation: duty-free import of inputs for exports.
• Special Economic Zones (SEZ Act 2005): their performance was mixed; the Baba Kalyani Committee (2018) recommended reform and a DESH Bill was proposed.
• Export Promotion Mission: announced in the 2025–26 Budget.

Trade remedies and protection

• Anti-dumping duty: imposed when goods are sold below their normal value and cause injury. India is among the heaviest users of anti-dumping measures, mostly against China.
• Countervailing duty: offsets foreign subsidies.
• Safeguard duty: a temporary measure against an import surge, without any finding of unfair trade.

Investigations are carried out by the Directorate General of Trade Remedies (DGTR); the Finance Ministry imposes the duties.

Non-tariff measures: Quality Control Orders (QCOs) and import licensing for laptops (2023).

The World Trade Organization

Origins: the WTO replaced the GATT (1947) on 1 January 1995, after the Uruguay Round (1986–94). It is headquartered in Geneva and has 166 members. India is a founding member.

Principles:

• Most-Favoured-Nation (MFN) treatment: non-discrimination between partners.
• National treatment: no discrimination between imports and domestic goods once inside.
• Transparency, and special and differential treatment (S&DT) for developing countries.

Key agreements:

• GATT (goods);
• GATS (services);
• TRIPS (intellectual property);
• the Agreement on Agriculture (AoA);
• SPS (sanitary and phytosanitary measures) and TBT (technical barriers to trade);
• TRIMS (investment measures);
• the Trade Facilitation Agreement (2017).

Agreement on Agriculture boxes:

• Amber box: trade-distorting support. It is capped by de minimis limits of 10% of the value of production for developing countries and 5% for developed countries.
• Blue box: production-limiting payments.
• Green box: minimally distorting support such as research and extension, which is unlimited.

India's issue is public stockholding for food security. Its MSP procurement is counted as amber-box support, calculated against a 1986–88 external reference price. The Bali Ministerial (2013) created a "peace clause" protecting such programmes from challenge until a permanent solution is found. India invoked it for rice in 2020 and later years.

Dispute settlement: the Appellate Body has been non-functional since December 2019, because the US has blocked the appointment of its members. Some members use the MPIA interim arrangement; India is not part of it.

Ministerial Conferences:

• MC12, Geneva, 2022: fisheries subsidies agreement (on illegal, unreported and unregulated fishing), a TRIPS waiver for COVID vaccines, and food security declarations.
• MC13, Abu Dhabi, 2024: limited outcomes. India blocked the China-led Investment Facilitation for Development plurilateral.
• MC14: scheduled for Cameroon in 2026.

India's positions:

• a permanent solution on public stockholding;
• protecting its fishers (S&DT in fisheries);
• opposing e-commerce customs duty moratorium extension and new issues such as investment and labour;
• restoring the Appellate Body.

India's trade agreements

Types: a Preferential Trade Agreement (tariffs cut on some goods) → an FTA (substantial trade) → a CECA/CEPA (goods, services, investment and more). A customs union has a common external tariff.

Existing agreements:

• SAFTA (2006);
• the India–ASEAN Trade in Goods Agreement (2010), under review since 2023;
• CEPA with South Korea (2010) and CEPA with Japan (2011);
• India–Mauritius CECPA (2021);
• India–UAE CEPA (May 2022);
• India–Australia ECTA (December 2022);
• the India–EFTA TEPA, signed March 2024 and in force from 1 October 2025, with an investment commitment of $100 billion over 15 years;
• the India–UK CETA, signed July 2025; it comes into force after ratification;
• the India–Oman CEPA, signed in 2025.

India–EU FTA negotiations resumed in 2022 and were targeted for conclusion around the end of 2025; check the latest status. India–US trade talks continued after US tariffs were raised in 2025.

RCEP: India walked out in November 2019. Its reasons:

• fear of Chinese imports through the agreement;
• inadequate safeguards (auto-trigger);
• concerns of dairy and agriculture;
• a large trade deficit with RCEP members.

Earlier FTAs: they were criticised for low utilisation by Indian exporters (about 25%), inverted duty structures and widening deficits. The newer agreements focus on markets that complement India, and on services, mobility and investment.

Analysis: is India becoming protectionist?

Since 2018: India raised tariffs on many items (electronics, toys, solar) under "Atmanirbhar Bharat". Critics warned that this would hurt global value chain integration.

Since 2025: India has cut many tariffs (the 2025–26 Budget reduced basic customs duty slabs) and signed new FTAs.

The balance: keep strategic autonomy and protect sensitive sectors (agriculture, dairy), while integrating with trusted value chains (China+1, semiconductors and electronics).

Common prelims traps

• MEIS was replaced by RoDTEP after the WTO ruling.
• The peace clause came from the Bali (2013) Ministerial, not Doha.
• India is not in RCEP and is not part of the MPIA.
• The DGTR investigates trade remedies; the Finance Ministry imposes the duties.
• Green box support is not subject to limits.

Practice: Mains question

*"India's recent trade agreements mark a shift from its earlier caution towards FTAs." Discuss, with reference to India's experience with RCEP and its new generation of trade agreements. (250 words)*