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Trade Policy Framework
6.1 India's Exchange Rate Management
India follows a managed float exchange rate regime — the rupee's value is primarily determined by market forces, but RBI intervenes to prevent excessive volatility.
Rupee value drivers:
- Current account balance
- FDI and FPI inflows
- Global risk sentiment (affects FPI)
- US Federal Reserve policy (interest rate differentials)
- Oil prices (India's largest import)
Rupee depreciation trend: Rs 31/$ (1991) → Rs 44/$ (2007) → Rs 68/$ (2013 crisis) → Rs 83–84/$ (2022–24)
Impact of rupee depreciation:
- Makes imports expensive (oil, electronics) — inflationary
- Makes exports cheaper (IT services, pharma) — competitive
- Increases rupee value of foreign debt repayment
Capital Account Convertibility: India has current account convertibility (trade in goods/services freely settled). Full capital account convertibility (free cross-border movement of capital) is not yet implemented — RBI maintains controls to prevent sudden capital flight.
6.2 Export Promotion Institutions
| Institution | Role |
|---|---|
| DGFT (Directorate General of Foreign Trade) | Implements FTP; issues import/export licences, advance authorisations |
| APEDA (Agricultural & Processed Food Products Export Development Authority) | Promotes agricultural exports; sets standards |
| MPEDA (Marine Products Export Development Authority) | Promotes marine/seafood exports; quality control |
| EEPC (Engineering Export Promotion Council) | Promotes engineering goods exports |
| EXIM Bank (Export-Import Bank) | Export finance; LOC for developing countries |
| ECGC (Export Credit Guarantee Corporation) | Export credit insurance for Indian exporters |
6.3 Special Economic Zones (SEZs)
SEZs (under Special Economic Zones Act 2005) are designated zones with simplified customs procedures, tax concessions, and world-class infrastructure.
Key statistics:
- Approved SEZs: 425+ (2024); operational: 260+
- Exports from SEZs: Rs 11.08 lakh crore (2022–23) — ~28% of India's merchandise exports
Controversies: Land acquisition issues, tax concession costs, limited job creation relative to expectations; some SEZs functioning below capacity.