Trade Policy is a strategic framework (concept/scheme) formulated by the Government of India to regulate and promote the country's international trade activities. The current framework is the Foreign Trade Policy (FTP), 2023, which is administered by the Directorate General of Foreign Trade (DGFT) under the Ministry of Commerce and Industry. Historically, India's trade policy was protectionist, focusing on import substitution after independence, which led to economic inefficiencies. The policy underwent a watershed shift toward liberalization following the balance-of-payments crisis in 1991.
The legal basis for the policy is the Foreign Trade (Development and Regulation) Act, 1992 (FTDR Act), which replaced the Imports and Exports (Control) Act, 1947. The FTDR Act, 1992, empowers the Central Government to make provisions for the development and regulation of foreign trade. The mechanism works by classifying goods as Free, Restricted, or Prohibited, and every importer and exporter must obtain an Importer Exporter Code Number (IEC) from the DGFT. The FTP includes key schemes like the Export Promotion Capital Goods (EPCG) scheme and the Advance Authorisation (AA) scheme to boost exports.
The policy connects directly to the FTDR Act, 1992, and aims for compliance with World Trade Organization (WTO) norms and various Free Trade Agreements (FTAs). The FTP 2023, which came into effect on April 1, 2023, replaced the fixed-term FTP 2015-20 with a dynamic, open-ended framework. A recent amendment (Notification No. 23/2026-27 dated July 13, 2026) inserted Paragraph 2.20B into the FTP 2023 to prohibit the import of goods produced using forced labour. This change also inserted Paragraph 11.64 in Chapter 11 to define "Forced Labour" in alignment with the International Labour Organization's Forced Labour Convention, 1930 (No. 29).