The department is responsible develops the regulatory environment and policy framework for international trade. It is the facilitator for increasing India’s share in global trade. It formulates, implements and monitors the foreign trade policy. It is also entrusted to engage in bilateral and multilateral negotiations for trading relations in terms of trade agreements and anti-dumping action as well as holds trade shows abroad and provides advisory services to exporters and importers. The department operates under the Ministry of Commerce and Industry, closely coordinating with the Department of Industry to increase India’s role in manufacturing exports. The department is also instrumental in establishing Special Economic Zones that produce goods and services for export.

The department is organized into eight divisions: administrative, finance, economic, trade policy, foreign trade territorial, state trading & infrastructure, supply and plantation. There are three attached bodies, eleven subordinate offices, five autonomous bodies, seven public sector undertakings, fourteen export promotion councils besides a number of advisory bodies and other organizations associated with the department.

The trade policy division has emerged as the main facilitator of liberalization and globalization. This division has to keep abreast of issues raised as the World Trade Organization (WTO), United Nation Committee of Trade and Development (UNCTAD), etc and negotiate at various multilateral forums. It also undertakes negotiations for agreements on free/preferential trade with various countries or groups of countries.  Conversely, it also formulates various measures to counter dumping and other unfair trade practices.

The foreign trade territorial division looks after state trading and barters deals, organizes trade fairs across the world and undertakes commercial publicity.

From 1905 onwards, the functions of this department were handled by the Department of Commerce and Industry. The British Raj established a separate Department of Industry in 1921. In 1937, after Department of Industries and Labour was split into the Department of Communications and the Department of Labour, the Department of Commerce assumed some of the responsibilities of the Department of Industries. In 1943, responsibilities for industries where assumed by a new entity, the Department of Industries and Civil Supplies.

After Independence, the Department of Commerce was rechristened the Ministry of Commerce. Alongside the Ministry of Industries and Supplies, it was placed in the portfolio of a single cabinet minister. It was amalgamated with the Department of Industry in 1951 but there have been several changes in the organizational set up of the Ministry of Commerce and Industry since then by which the two departments were separated and amalgamated a number of times reflecting the change of attitude of the policy makers.

Since the Second Five-Year Plan, beginning in 1956, India followed an import-substitution strategy that didn’t focus on foreign trade. The goal instead was to develop a strong domestic capital goods industry. As a result, a separate department for heavy industries was formed in 1962. In 1963, the Departments of Foreign Trade and Industry were designated as separate ministries as more emphasis was placed on domestic industries. However, through the 1970s, Departments of Internal Trade, Civil Supplies and Textiles were gradually added to the Ministry of Commerce, recognizing the importance of increasing foreign trade in these areas. While textiles was separated out as a separate ministry in 1985, the ministry was reorganized in 1995, following liberalization of industrial and foreign trade policies, when the two departments of commerce and industry were once again amalgamated under the Ministry of Commerce and Industry. The department of supplies was abolished in 2000.

The mandate for the department is to double India’s exports of goods and services by 2014 and double India’s share in global trade by 2020. For the purpose, the department initiates spending for market development assistance, market access initiative and set up Special Economic Zones. 

The strategic plan released on May 3, 2011 aimed to achieve annual growth rate of 25% till 2016-2017. With this framework, the department aimed to increase exports from $225 billion in 2010-11 to $450 billion in 2013-14 and to $750 billion in 2016-2017. The plan, however, acknowledged that the targeted growth was contingent on the recovery of the global economy from the recession. It also recognized that high productivity in Chinese manufacturing industries and the emergence of other low cost producers in countries like Bangladesh, Vietnam remained a threat to export growth. Indian industries are still weakened by in the face of infrastructural bottlenecks, lack of technology, low productivity and procedural delays in investment approvals.

The department represents India at the WTO conferences and negotiations. It has been pursuing an early resolution of the current round of negotiations, the Doha Round, which has focused on the issues of free trade between countries, keeping the concerns of the developing countries strongly in the agenda. India initially argued strongly in favor of developing countries on trade issues like Agreement on Agriculture (AoA), Non-agriculture Market Access (NAMA), Trade in Services and Trade-related Intellectual Property (TRIP) but has now so that the negotiations can be concluded. The department fights non-tariff barriers against India in identified sectors and is also able to investigate dumping in various Indian sectors and to determine countervailing duties on identified items.

The department is currently engaged in negotiations for trade agreements with countries like Thailand, Mauritius, Singapore, Pakistan, New Zealand, Canada, Australia and Indonesia; and bodies like the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation, Gulf Cooperation Council (GCC), European Union and Asia Pacific Economic Cooperation. Agreements that have already been concluded with Nepal, Finland, Chile, Afghanistan, Bhutan, Japan, Korea, Sri Lanka and the member countries of the South Asian Free Trade Agreement (SAFTA) and MERCUSOR.

The department undertakes trade promotion, programs and schemes in India and abroad to promote export growth. Special focus areas are enhancing bilateral trade with CIS countries, sub-Saharan African and Latin American countries and for Duty Free Tariff Preference Scheme for Countries that the UN has identified as Least Developed Countries.

The department announced the policy for establishing Special Economic Zones (SEZs) in 2000. The policy was expected to carry forward the goals of Export Processing Zones, which were first introduced in 1965, by overcoming the shortcomings of the earlier scheme, like the multiplicity of clearances required and subpar infrastructure and also provide more fiscal incentives. The new policy aimed to make SEZs an engine for economic growth with fiscal incentives from both Central and State governments. Units set up in SEZs have a number of facilities including duty free imports, 100% exemption from income tax on export income, central sales and service taxes, external commercial borrowings up to a limit and single window clearances. SEZ developers have been provided incentives like exemption on customs, excise, minimum alternate, dividend distribution, central sales and service tax.  The SEZs were brought under the Foreign Trade Policy in 2000 but a separate SEZ Act was passed in 2005. The SEZ Rules provided for simplified procedures to set up units and conduct business in the SEZs, single window clearances to set up SEZs and units in SEZs. The approval process involves the state government as well as representatives from various ministries but the Board of Approval is headed by the Department of Commerce. The Board is also responsible for monitoring the operations of the SEZs. At present, there are 143 operating SEZs in India, including 7 that were converted from the erstwhile Export Processing Zones and 12 that were approved before the SEZ Act 2005 was passed. Another 584 approvals have been granted for setting up SEZs.

The department has plantation schemes for rubber, spices, tea and coffee through which it funds research, technical and marketing assistance.

The department publishes the monthly and quarterly trade statistics commodity-wise and country/ region wise collected and compiled by the Directorate General of Commercial Intelligence and Services (DGCI&S).

Attached Bodies, Autonomous Bodies and Public Sector Undertakings:

Attached and Subordinate Bodies

Directorate General of Foreign Trade: The DGFT, headquartered in New Delhi, plays the role of the facilitator to increase exports. The DGFT formulates the foreign trade policies, issues licenses to exporters and monitors trade figures through the 35 regional offices.

Directorate General of Supplies and Disposal: The DGSD, also based in New Delhi, deals with the rates contracts, procurement of stores, shipment and clearance of imported cargo. It has three regional offices in Mumbai, Chennai and Kolkata.

Directorate General of Anti-Dumping and Allied Duties: The DGAD, formed in 1998, carries out investigations and recommends the amount of countervailing duty and anti-dumping duties that should be imposed on identified items under the Customs Tariff Act.

Directorate General of Commercial Intelligence and Statistics: The DGCI&S, headquartered in Kolkata, collects, compiles and disseminates India’s trade statistics and commercial information. It publishes monthly and quarterly data on imports and exports. Besides, the directorate brings out other publications on inland and coastal trade, shipping and cargo statistics, etc. There is usually a mismatch between trade statistics compiled by the DGCI&S, on the basis of customs data, and that compiled by the Reserve Bank of India, on the basis of foreign exchange flows.

Offices of Development Commissioner of Special Economic Zones: SEZs operate under the purview of the SEZ Act, 2005. At present, there are eight development commissioners of SEZs that oversee the development of and provide the infrastructure for SEZs, which aim to generate additional economic activity, promote exports of goods and services, attract investment from domestic and foreign sources and create employment.

Autonomous Bodies

Commodity Boards: Coffee Board, Rubber Board, Tea Board, Tobacco Board, Spices Board. These boards set up research institutes, field stations, demonstration farms, nurseries, etc. to assist the industry by providing scientific, technical and economic research support. The Boards also provide marketing support for exports.

Marine Product Export Development Authority: MPEDA, based in Cochin, focuses on marine exports.

Agriculture and Processed Food Products Export Development Authority: New Delhi – With five regional offices, the development authority is entrusted with the responsibility of promoting and monitoring of exports of agricultural and processed food products.

Export Inspection Council: New Delhi – The council is responsible for the enforcement of quality control and compulsory pre-shipment inspection of products exported. Field organizations are located at Chennai, Delhi, Kolkata, Kochi and Mumbai which in turn have 35 sub-offices and laboratories located at various ports and industrial centers.

Indian Institute of Foreign Trade: New Delhi – The Institute conducts academic courses leading to degrees in International Business and Export Management and also short term training courses, organizes and publishes research on international trade, marketing research, area surveys, commodity surveys, marketing surveys, etc.

Indian Institute of Packaging: Mumbai – It organizes research on raw materials for the packaging industry, conducts training courses on packaging and provides consultancy services in the area.

Public Sector Undertakings (PSUs)

State Trading Corporation: The STC It is the canalization agency for import of essential items like wheat, pulses, sugar, etc and also for developing exports of mainly commodities from India. Although the core strength of STC is in handling import and export of bulk agro-goods, it is also involved in trade of steel, gold jewelry and bullion, hydrocarbons, minerals, metals, fertilizers, petrochemicals, etc.

Minerals and Metals Trading Corporation: The MMTC deals in exports of minerals and ores, imports of non-ferrous metals, raw materials for fertilizers, finished fertilizers. It has also added other commodities like steel, diamond, bullion, etc. to its trading portfolio.

Project and Equipment Corporation: The PEC It takes up turnkey projects abroad and undertakes equipment exports.

Export Credit Guarantee Corporation of India Limited: The ECGC It provides risk insurance cover to exporters and banks.

India Trade Promotion Organization: The ITPO organizes trade fairs and exhibitions in India and abroad, buyer-seller meets, contact promotion programs and provides information on products and markets.

Export Promotion Councils: There are 14 EPCs for various items that perform advisory and executive roles.

Federation of Indian Export Organizations: The FIEO is the apex body of several export organizations and provides assistance to members comprising professional exporters.

The expenditure of the department may be categorized in terms of plan and non-plan outlays. Of the total budget of 2011-12, 30% was allocated for plan outlays, the remainder being for non-plan outlays.

The main plan outlays are for centrally sponsored schemes like Assistance to States for the Development of Export-related Infrastructure and Allied Activities, which accounted for 42% of the plan expenditure. The other plan expenditure included those incurred to produce market survey reports, funds provided to Rubber, Spice, Coffee and Tea Boards, market promotion activities, provision of export infrastructure, etc.

The major non-plan expenditures are incurred for export subsidy, grants and interest subsidy to banks, which account for 66% of the total non-plan expenditure of the department. Other non-plan expenditure includes administrative expenditure of the SEZs and other attached and subordinate bodies as well as the secretariat of economic services that formulates foreign trade policies.

SEZs Accused of Landgrabs

The SEZs have drawn in controversies, mostly because of land acquisition. There has been intense controversy regarding the SEZs that ruin livelihoods by acquiring land. There have been a number of anti-SEZ activist groups protesting forcible land acquisition by state governments that have been desperate to attract investments. A particular contentious issue has been acquisition of tribal land. Following violent protests in many areas like Nandigram in West Bengal, Jamnagar in Gujarat, Navi Mumbai in Maharashtra, Dadri in Uttar Pradesh and in Goa, Orissa and Haryana, the SEZ policy came to a standstill since 2010. The Uttar Pradesh government scrapped the multi-product SEZ proposed along the Noida-Greater Noida Express Highway by Reliance and the Maharashtra government scrapped Reliance’s Navi Mumbai SEZ project. The Korean company, POSCO, and the Orissa government are facing serious problems in acquiring land to set up the world’s largest steel plant. In West Bengal, the Trinamool government came in power, displacing the Communists that ruled the state for 34 years, by getting political mileage on its opposition to SEZs and land acquisition for the Nandigram SEZ. However, the ruling party is now finding it difficult to attract investment by leading national companies like Infosys, which want their units in the state to get SEZ benefits. 

India’s Controversial Special Economic Zone Policy, (by Lorraine Kennedy, Reseau Asie & Pacifique)

Environment of Land Diversion, Displacement and Rehabilitation: A Study of Indian SEZs (by NMP Verma and V Kumar, Madras School of Economics)

POSCO seeks more time for Orissa SEZ project, (by Press Trust of India, Business Standard)

West Bengal Set to Scrap SEZ Act (by Sabyasachi Bandopadhyay , Indian Express)

Once a Pioneer, SEZs Decline in Maharashtra (by Prafulla Marpakwar, Times of India)

SEZs Increase Regional Disparity

It has also been claimed that SEZs have increased regional income inequalities. This follows from the fact that SEZs are developed by private companies, as opposed to SEZs in China that are developed by the government. Private developers have focused on states that have attracted more investments for manufacturing and services. The strong presence of real estate developers in SEZ development has also resulted in speculative bubble.

Special Economic Zones in India: Following Well Trodden Paths, (by Rohit Prasad and Rupamanjari Sinha Roy, Indian Journal of Economics and Business)

Locational Disadvantage, (by Sheetal Sharma, Mainstream)

Alleged Diversion of Goods from SEZs to the Domestic Market

SEZs have also not resulted in much of export growth as there are concerns of diversion of exports to Domestic Tariff Area, a problem that EPZs faced earlier which the SEZs were supposed to control. The issue has been in the focus of the Comptroller of Auditor General (CAG) that reported in Parliament that the government lost Rs 20bn because domestic sales from units in SEZs were being treated as export earnings.

Another SEZ Controversy (Business Standard)

CAG Says will Look into SEZ Land Acquisition (by Smita Aggarwal, Indian Express)

Govt Approves Denotification of Dr Reddy’s SEZ in Andhra Pradesh (Economic Times)

Better Coordination with State Governments on Export Policy

India’s export growth has not been commensurate with the import liberalization regime that the department of commerce has embarked on. Global financial recession in 2008 did not affect exports from India to a large extent but by the end of 2011, there are signs of exports slowing down to the lowest in two years as a result of sluggish consumer confidence because of the Euro debt crisis. Information Technology exports have been the major source of export growth from India and there are signs of slowing down of exports from this sector as well.

It suggested that the department incorporates the state government to formulate an inclusive export policy so that the strategy may be more broad-based and exports are not concentrated in isolated pockets. Especially, there should be more incentives for SMEs to increase export.

Improve Infrastructure to Grow Manufacturing

There should be more focus on export competitiveness by Indian manufacturers. While information technology exports have increased on the basis of higher productivity of knowledge-intensive, labor-intensive and resource-intensive exports have lagged behind. There are suggestions to improve the infrastructure in terms of telecommunication, port services, etc to make Indian exporters more competitive. For this, the commerce department needs to coordinate with other departments and ministries so that export growth may be more broad-based.

Increasing Foreign Direct Investment

Foreign direct investments are one of the key elements to boost investment. Encouraging FDIs is the portfolio of the department of industrial policy under the same ministry. Better coordination with the industry department could improve India’s FDI inflows.

India-EU FTA

India and the European Union are negotiating a Free Trade Agreement. This has thrown open a debate whether Indian producers and consumers will benefit from the FTA.

For India-EU FTA

Proponents of India-EU FTA argue that this will lead to greater export avenues of India producers. India is advocating an asymmetrical tariff structure so that EU will eliminate 95pc of tariffs for imports from India while India will retain 90pc of the tariffs so that the disparity of development between the two regions is taken into account.

Need for Public Debate on India-EU FTA, (by Jayashree Sengupta, Observer Research Foundation)

FTA with EU to Boost Trade in Textiles, Garments Exports (by Fibre2Fashion, Eximguru.com)

Against India-EU FTA

Many consumer forums feel that the India-EU FTA will push up prices of medicines and make them unaffordable for the common man. One of the provisions of the FTA under negotiation is data exclusivity of pharma companies which is not allowed under Indian Patent Law at present. Data exclusivity would mean clinical trial results filed by one company would not be available for other companies. This might lead to duplication of tests leading to increase in prices. There are also fears that temporary movement of workers to the EU would lead to competition in the Indian IT sector. The EU insistence of a competition policy in India for the FTA is feared to given an upper hand to European MNCs.

HIV+ Patients Protest against Controversial India-EU FTA (Times of India)

Why the Secrecy: India’s FTA with EU, (by Shalini Bhutani, bilaterals.org)

Immediately Halt EFTA Negotiations (open letter from members of the Forum on Free Trade Agreements and other civil society activists, Intercultural Resources)      

SIAM Flays Cut on Duty on Imported Cars (The Hindu)

Kamal Nath was the previous Minister of Commerce and Industry. He won the elections eight times and was known as a loyalist to the Gandhi family. He played an important role representing India and maintaining an anti-protectionist stand in the WTO. Nath was instrumental in proposing the Delhi Mumbai Industrial Corridor. He was moved from the ministry to give a signal towards softening India’s stand on protectionism at the WTO. Nath had a number of scandals to his name, including his role in provoking the anti-Sikh riots in 1984, bribery charges and charges of environmental damage by building a hotel on the banks of the Beas River in Himachal Pradesh.