India’s Trade Policies: Supporting Agricultural Exports

India is one of the world’s largest agricultural producers – yet it accounts for just 2.4% of global agricultural exports. That gap between production capacity and export performance is precisely what India’s Foreign Trade Policies have tried to close over the past two decades. Through a series of structured policy frameworks – especially the FTP 2009-2014 and FTP 2015-2020 – the government designed a comprehensive set of export incentives, institutional schemes, and market development tools targeting the agricultural sector. Understanding how these policies were built, what they offered, and where they fell short gives us a clearer picture of the road ahead for Indian agri-exports.

The role of India’s Foreign Trade Policy in shaping agricultural exports 🔗

India’s Foreign Trade Policy (FTP), governed by the Directorate General of Foreign Trade (DGFT) under the Ministry of Commerce and Industry, is announced every five years. It sets the guidelines for import and export of goods and lays out incentive structures for exporters. Agriculture has consistently been one of the priority sectors in these policies, given its role in rural employment, food security, and foreign exchange earnings.

The policy framework is updated annually on 31st March, with modifications taking effect from April. Two broad aspects define the FTP: an import policy focused on regulating inflows, and an export policy aimed at maximizing outflows – particularly from sectors like agriculture, handicrafts, marine products, and textiles.

FTP 2009-2014: Building the export foundation amid global recession 🔗

The Foreign Trade Policy 2009-2014 was launched against a difficult backdrop. India’s exports had declined sharply due to the global financial crisis, and several export-oriented small and medium enterprises had shut down, triggering unemployment. The policy’s short-term objective was to arrest the declining trend, while the long-term goal was to double India’s share in global merchandise trade by 2020.

Export growth targets and strategy 🔗

The policy set an annual export growth target of 15% for the first two years, rising to 25% in subsequent years, with a goal to reach US$ 200 billion in exports by March 2011. The broader strategy combined fiscal incentives, institutional changes, procedural simplification, and market diversification – with special focus on labour-intensive sectors including agriculture, handlooms, marine goods, and handicrafts.

Key agriculture-specific schemes under FTP 2009-2014 🔗

Vishesh Krishi and Gram Udyog Yojana (VKGUY) was a flagship scheme specifically designed to promote exports of fruits, vegetables, flowers, minor forest produce, and their value-added products. Agricultural infrastructure incentive scrips were made available to status holders in the agri sector (Chapters 1-24) under this scheme.

Agri Export Zones (AEZ) received dedicated funding under the Assistance to States for Infrastructure Development of Exports (ASIDE). Capital goods imported under the Export Promotion Capital Goods (EPCG) Scheme could be installed anywhere within an AEZ, and units located in these zones were exempted from bank guarantees under the EPCG scheme. This allowed agri-exporters to import modern processing and packaging machinery at reduced or zero duty, provided they met their export obligations within a specified period.

The Market Access Initiative (MAI) Scheme provided financial assistance to recognized associations for export promotion projects covering marketing, capacity building, and technological services. Financial support was also extended for contesting anti-dumping and trade restriction litigation in foreign countries, helping Indian exporters protect their market access abroad.

The Focus Market Scheme incentive rate was raised from 2.5% to 3%, and the Market Linked Focus Product Scheme (MLFPS) was expanded to include more products and markets, notably covering all countries in Africa, Latin America, and major Asian markets like China and Japan. The Focus Product Scheme (FPS) incentive was also raised from 1.25% to 2%, bringing more agricultural and allied products into higher incentive brackets.

Towns of Export Excellence (TEE) were identified as strategic clusters to maximize export potential. For agriculture, handlooms, and fisheries sectors, the threshold for TEE recognition was set at a lower bar of Rs. 150 crore – compared to Rs. 750 crore for other sectors – reflecting the government’s intent to support smaller agri-export clusters.

FTP 2015-2020: Simplification and scale 🔗

The FTP 2015-2020 came into effect on 1st April 2015 with a central theme of making India a significant player in global trade by 2020. It was aligned with the government’s “Make in India” vision and aimed to support both manufacturing and services, with special emphasis on improving the ease of doing business. The policy was later extended until 31st March 2021.

Rationalization of schemes: MEIS and SEIS 🔗

One of the most significant changes in FTP 2015-2020 was the consolidation of multiple incentive schemes into two simplified ones. The five previously existing schemes – Focus Product Scheme, Focus Market Scheme, Market Linked Focus Product Scheme, Agriculture Infrastructure Incentive Scrip, and Vishesh Krishi and Gram Udyog Yojana – were merged into the Merchandise Exports from India Scheme (MEIS) for goods and Service Exports from India Scheme (SEIS) for services.

Under MEIS, agricultural and village industry products were supported at rates of 3% and 5% across global markets. The scrips issued under MEIS were freely transferable and could be used to pay basic customs duty on imports, making them a flexible financial tool for exporters. This consolidation reduced complexity and administrative burden considerably.

Single window system for perishable agricultural produce 🔗

A dedicated single window system was introduced to facilitate the export of perishable agricultural produce. Multi-functional nodal agencies accredited by the Agricultural and Processed Food Products Export Development Authority (APEDA) were set up to manage this system, cutting down transaction time and handling costs – a critical improvement for time-sensitive commodities like fruits, vegetables, and flowers.

EPCG scheme and export obligation reforms 🔗

The EPCG scheme was retained and refined under FTP 2015-2020. For domestic procurement of capital goods, the export obligation was reduced from 90% to 75%, making the scheme more accessible to agri-businesses investing in local sourcing. Exemption from payment of IGST and Compensation Cess on imports under EPCG authorizations was also extended, reducing upfront capital costs for exporters upgrading their infrastructure.

Niryat Bandhu Scheme and capacity building 🔗

The Niryat Bandhu Scheme was introduced to mentor new and potential exporters on the intricacies of foreign trade through counselling, training programmes, and outreach. This was particularly relevant for small farmers and first-generation agri-exporters who lacked knowledge of documentation, compliance, and international market requirements.

Mid-term review and the Agriculture Export Policy signal 🔗

The Mid-Term Review of FTP 2015-2020, announced in December 2017, increased MEIS rates by 2% for labour-intensive sectors including marine products. It also announced the forthcoming release of a dedicated Agriculture Export Policy – a signal that the government recognized the need for a standalone, farmer-centric export framework. This eventually materialized as the Agriculture Export Policy (AEP) 2018, which set a vision of doubling farmer incomes and targeting $60 billion in agricultural exports.

Why export growth targets remained difficult to achieve 🔗

Despite the institutional architecture built through these policies, achieving the ambitious export targets remained a persistent challenge. Research examining India’s agricultural export determinants highlights the role of past export momentum, agricultural output, water use efficiency, corruption levels, and consumer prices in shaping export performance – factors that lie well beyond the reach of trade policy alone.

Global price volatility and economic conditions 🔗

Between 2013-14 and 2015-16, India’s agricultural exports dropped sharply from USD 43.25 billion to USD 32.81 billion, primarily due to a crash in global food prices as reflected in the FAO’s Food Price Index. Even when domestic policy was supportive, falling global prices eroded India’s export revenues. The situation reversed post-COVID-19 and during the Russia-Ukraine conflict, when surging global prices boosted exports to USD 53.2 billion in 2022-23 – demonstrating how sensitive India’s agri-export performance is to external conditions.

Domestic inflation and conflicting policy priorities 🔗

One of the most persistent tensions in India’s agricultural trade policy is the conflict between export promotion and domestic food security. Concerns over food inflation led to restrictions on white non-basmati rice exports in July 2023, sugar export bans in October 2023, and wheat export bans since May 2022 – effectively reversing years of export-promotion efforts for these key commodities. When domestic prices rise, the government frequently intervenes with export bans, minimum export prices, or high export duties, which disrupts buyer relationships and reduces India’s reliability as a supplier in global markets.

Structural barriers in infrastructure and quality 🔗

Inadequate cold chain infrastructure, inefficient logistics, and quality and traceability inconsistencies continue to hamper India’s agricultural export competitiveness. High post-harvest losses – estimated at 30% for fruits and vegetables – reduce the volume available for export and inflate effective costs. Meanwhile, non-tariff barriers in international markets, such as EU pesticide residue standards, create compliance challenges that many small exporters are ill-equipped to navigate.

Concentration risk in the export basket 🔗

India’s agricultural export basket remains heavily reliant on a limited range of commodities including basmati rice, buffalo meat, spices, tea, coffee, and marine products – a concentration that makes the sector vulnerable to price fluctuations and market-specific access challenges. Competitors like Brazil (sugar), Vietnam (rice), and Thailand (processed foods) offer better infrastructure and competitive pricing in overlapping product categories.

Where India stands today and what the policy signals 🔗

India’s agricultural exports reached $51.9 billion in 2024-25, a 6.4% rise from the previous year, outpacing overall merchandise export growth. However, agricultural imports also surged by 17.2%, narrowing the agricultural trade surplus to $13.4 billion – less than half of the $27.7 billion surplus recorded in 2013-14. This shrinking surplus underscores the structural pressures that still exist despite decades of export-promotion policy.

The trajectory from FTP 2009-2014 through FTP 2015-2020 and the Agriculture Export Policy 2018 shows a maturing policy architecture – from scattered scheme-based incentives to a more integrated, farmer-centric approach. Continued efforts to enhance the share of processed food in India’s export basket are essential, given the global shift in demand toward high-value processed agricultural products. India’s processed food imports have risen more than 20 times between 2003 and 2023 – a reflection of both domestic demand growth and the gap in domestic processing capacity.

The Directorate General of Foreign Trade continues to update the policy framework. The Foreign Trade Policy 2023 carries forward several of these themes, with a greater emphasis on export hubs, e-commerce exports, and streamlined compliance – though the core tension between export competitiveness and domestic food price stability remains unresolved.

What do you think? Given that domestic food inflation has repeatedly led India to impose export restrictions on staples like rice, wheat, and sugar – should India adopt a more rules-based export policy framework that limits ad hoc bans in favour of predictable tariff mechanisms? And with India holding just 2.4% of global agricultural exports despite being one of the world’s top producers, which single structural reform – infrastructure, diversification, or compliance capacity – would have the greatest impact on closing that gap?

References

1. https://agriwelfare.gov.in/en/AgricultureTrade
2. https://www.dgft.gov.in/CP/?opt=ft-policy
3. https://ccbjournal.com/articles/indias-foreign-trade-policy-2009-2014
4. https://eximpe.com/blog/international-trade-finance/export-incentives-in-india-understanding-the-foreign-trade-policy-ftp
5. https://policy.asiapacificenergy.org/node/774
6. https://www.bankbazaar.com/tax/foreign-trade-policy.html
7. https://www.lexology.com/library/detail.aspx?g=fb502595-dc2f-47a7-baf9-c88c01bdf76c
8. https://policy.asiapacificenergy.org/node/775
9. https://www.tandfonline.com/doi/full/10.1080/23322039.2024.2344733
10. https://www.drishtiias.com/daily-updates/daily-news-analysis/india-latest-farm-exports-data
11. https://blog.pazago.com/post/india-agriculture-export-policy-objectives-challenges
12. https://gtri.co.in/DisplayFlagshipReports.aspx?ID=27
13. https://highlandpost.com/indias-agri-trade-crossroads-balancing-exports-imports-and-global-pacts/
14. https://www.epw.in/journal/2024/46/global-value-chains/agricultural-exports-and-trade-policy-responses.html