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II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES 
(1) GENERAL CONSTITUTIONAL AND LEGAL FRAMEWORK  
(i) Institutional and legal framework 
1. Since India's previous Review in 2002, there have been no major changes in its institutional 
and legal framework.  Executive power at the federal level is vested in the President who is assisted 
by the Cabinet1, while legislative power is held by the Pa rliament.  The head of the Executive, the 
President is elected for five years by an elector al college comprising elected members of both the 
upper and lower houses of Parliament and the state legi slatures.  The Vice President is elected also for 
a period of five years by an electoral college made up of members of both houses of Parliament.  The 
President is aided by the Council of Ministers, which is headed by the Prime Minister.  The Prime 
Minister is appointed by the President who also appoints the remaining Cabinet members on the advice of the Prime Minister.
2  Members of the Cabinet must be members of Parliament;  any Cabinet 
member who is not a member of Parliament for six consecutive months can no longer be a member of the Cabinet.
3 
2. The Parliament, made up of the Council of States (Rajya Sabha) or upper house, and the 
House of the People (Lok Sabha) or lower house, holds legislative power.  The Council of States may 
have a maximum of 250 members (of which 12 nomina ted by the President);  the present Council has 
242 members (31 October 2006).4  It may not be dissolved but one third of its members are subject to 
retirement every two years.5  The House of the People, which sits for five years, may have a 
maximum of 550 members, of which 530 are elected from the states and 20 from the 
Union Territories6;  there are currently 533 members of the House of the People.7   
3. All bills, with the exception of money bills, may be introduced in either house;  money bills, 
under Article 109 of the Constitution, may only be introduced in the House of the People.  The 
procedure regarding the passage of bills has remained  unchanged since the last Review of India:  all 
bills except bills amending the Constitution, must be passed by a simple majority in both houses of 
Parliament and be signed by the President in order to become law.  The President may request 
amendments to the bill and withhold assent;  however, if  the bill is passed again in its original form, 
the President may not withhold assent.  Money bills, once approved by the House of the People, must either be approved or returned to the House of  the People with recommendations by the Council of 
States within 14 days.  If the House of the People accepts the recommendations, the bill is deemed to 
be passed by both houses;  if it does not accept the r ecommendations, the bill is deemed to have been 
passed by both Houses in the form in which it was p assed by the House of the People.  If the bill is 
not returned to the House of the People within 14 da ys, it is also deemed to be passed by both houses. 
                                                     
 
1 Articles 52 and 53 of Chapter 1, Part V of the Constitution.  Neither the President nor the Vice 
President can be members of Parliament. 
2 Article 75. 
3 Article 75. 
4 Members of the Council of States include not more  than 238 representatives of the states, who are 
elected by the (elected) legislative assembly members of each state, as well as 12 members nominated by the 
President (Article 80). 
5 Each member is elected for a term of six year s.  Every two years, one third of these members 
complete their six-year term resulting in the election of one third of the membership of the Council at the 
beginning of every third year. 
6 In addition, under Article 331 of the Constitution, the President may, if he believes that the Anglo-
Indian community is not adequately represented in  the House of the People, nominate not more than 
two members of that community to the House of the People. 
7 Articles 80 and 81. India WT/TPR/S/182/Rev.1 
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4. Under Article 123 of the Constitution, if the Pr esident deems it necessary to enact legislation 
during Parliament's recess, an ordi nance may be promulgated.  The ordinance has the same force as an 
Act of Parliament.  However, it will expire six w eeks after the reassembly of Parliament unless it is 
enacted into law by both houses. 
5. The Constitution also provides for a division of jurisdiction between the Parliament and the 
legislative assemblies of states and union territories.8  Under the Seventh Sche dule, the Parliament has 
jurisdiction over international and inter-state trade and entering into treaties with foreign 
governments.9  International agreements, including the WT O Agreements, must be incorporated into 
domestic law in order to be invoke d before a domestic court of law. 
6. The judiciary is headed by the Supreme Court, consisting of a Chief Justice and not more than 
25 other judges, a High Court in each state and distri ct and session courts at the district level.  The 
Supreme Court has jurisdiction over all disputes between the Centre and states or between the states.10  
It is also the final court of a ppeal on civil and criminal proceedings of a High Court.  The Supreme 
Court may also, at its own discretion, grant special leave to appeal any judgement taken by a national court or tribunal.  Its decision is binding on all courts.  
7. India's legal system is based on written law.  The judiciary is independent and there is a 
separation of the judiciary from the executive.  A recent speech by the Chief Justice of India 
acknowledges that although the system continues to  command high esteem, it suffers from a shortage 
of staff, infrastructural constraints, and procedural delays.
11  As a result, the number of cases pending 
increased from nearly 2.8 million in 1999 to 3.5 million in 2005 in the High Courts and from 
20 million to almost 26 million in the lower courts.  Recent efforts to address this problem include the 
establishment of fast-track courts to resolve crimin al cases and more funding to the judicial system.12  
Other steps include a project on Information a nd Communication Technology Enablement of the 
Indian Judiciary, established in October 2005, and a National Legal Literacy Mission in March 2005.  
The lower courts, however, remain weak a nd apparently also prone to corruption.13  
                                                      
8 There are currently 28 states, 6 union territori es, and the national capital territory of Delhi.  
9 Other related areas in which the Union has jurisdiction include taxation (except for some taxes, such 
as on agriculture, land revenue, and minerals, and some excise taxes, which can be imposed by states), transport (railways, highways, maritime shipping, air transport), banking, insurance, and standards. 
10 As India is a union of states, the Constitution specifies certain responsibilities as being the 
jurisdiction of state governments, while others are in the jurisdiction of the Central Government (the Union list) and others are shared.  For example, i ssues relating to international trade a nd international agreements are in the 
Union list of the Seventh Schedule;  pub lic health and sanitation, agriculture, water, and land are state subjects;  
and economic and social planning, criminal and civil pr ocedures, electricity, and price controls are on the 
"Concurrent list". 
11 Speech by Chief Justice of India at the Inaugura tion of the Joint Conference of Chief Justices and 
Chief Ministers, 11 March 2006.  Viewed at:  http://www.supremecourtofindia.nic.in/new_links/ speach.htm [27 September 2006].  The ma in reasons, according to the Depart ment of Justice, include lack of 
responsiveness and transparency in administration, po pulation growth, changes in the pattern of litigation and 
inadequate strength of judges and judicial officers (Department of Justice, Ministry of Home Affairs online 
information.  Viewed at:  http://mha.nic.in/justi.htm [27 September 2006]). 
12 According to the Department of Justice, some Rs 2.8 billion has been released by the Centre to the 
state governments since 1993/94 for de veloping infrastructure facilities for th e judicial system (Department of 
Justice, Ministry of Home Affairs online inform ation.  Viewed at:  http://mha.nic.in/justi.htm 
[27 September 2006]). 
13 A study on corruption in India by Transparency International found in 2005 that, among public 
services, the lower courts were perceived by the population to be among the most corrupt (Transparency 
International, 2005b).  India was ranked 88th out of 158 in the 2005 Corruption Perceptions Index  
(Transparency International, 2005a).  Corruption is closely related to lack of transparency and consequent scope WT/TPR/S/182/Rev.1 Trade Policy Review 
Page 20 
 
 
8. In addition, to reduce the burden on the legal syst em and to enable quicker disposal of claims 
in some cases, tribunals such as Consumer Forums ha ve been set up.  An alternative form of dispute 
resolution, the Lok Adalat (courts of the people) ha s also helped to settle a large number of cases out 
of court, thereby reducing pressure on the already overburdened legal system.14  There are also 
provisions for the settlement of disputes under various Acts, such as the Telecom Regulatory 
Authority of India Act, 1995, which provides for a se parate institution to adjudicate disputes between 
telecommunications operators and/or consumers, with  the possibility of appeal to the High Court. 
(ii) Trade policy formulation and implementation 
9. Trade policy formulation and implementation rema ins with the Department of Commerce, in 
the Ministry of Commerce and Industry, in consultati on with other key ministries such as the Ministry 
of Finance, Agriculture, as well as ministries relating to services, and the Reserve Bank of India.  Trade policy is formulated and drafted in consu ltation with state and union territory governments, 
industry and farmers' associations, trade bodies,  research and academic institutions, and other 
stakeholders.  The policies are announced for a five -year period, along with annual reviews, in the 
Foreign Trade Policy (previously known as the Export-Import Policy), which is accompanied by the 
Handbook of Procedures.  The Foreign Trade Po licy and Procedures are implemented by the 
Directorate General of Foreign Trade (DGFT), while advice on tariff and related issues is provided by 
the Tariff Commission, both based in the Ministry of Commerce and Industry.
15  Other key 
departments of the Ministry include the Directorate General of Anti-dumping and Allied Duties, which deals with investigations and recomme nds action to be taken on anti-dumping and 
countervailing measures;  and the Directorate Ge neral of Commercial Intelligence and Statistics 
(DGCI&S), responsible for collecting, compiling, a nd disseminating data on trade.  Coherence and 
consistency between trade and other economic polic ies is maintained through inter-ministerial 
consultations prior to any key Cabinet decisions on policy. 
10. The Department of Commerce also deals with po licy relating to plantation crops (tea, coffee, 
rubber, cardamom, and tobacco), special economic zones, and export promotion and credit guarantee 
schemes through a number of autonomous bodi es and state-owned enterprises (SOEs).
16  The SOEs 
are the State Trading Corporation of India (STC ), STCL Limited, MMTC limited, PEC Limited, 
Export Credit Guarantee Corporation of India Limited (ECGC), and the India Trade Promotion Organization (ITPO).  The STC, STCL, and MMTC are also involved in state-trading activities 
(Chapter III(2)(xv) and (3)(ix)). 
11. Exports have been a major policy focus in recen t years and the Department of Commerce  is 
assisted in this function by several advisory bodies.   These include the Board of Trade, reconstituted 
in 2005 to maintain dialogue with traders and i ndustry to promote exports, and the Export Promotion 
                                                                                                                                                                    
 
for administrative discretion.  In this regard, India ranks among the most opaque (42nd out of 48) countries based 
on the 2004 Opacity Index , which measures the degree to which countries lack clear, accurate, easily 
discernible, and widely accepted pr actices governing the relationships  among governments, businesses, and 
investors.  This translates into a risk premium of roughly 6.1% (viewed at:  http://www.opacityindex.com/ 
opacity_index.pdf [17 January 2007]). 
14 According to information provided  by the authorities, by 31 Decem ber 2005 almost 50 0,000 such lok 
adalats had been set up and around 18.6 million cases settled out of court.  
15 The Tariff Commission was established in 1997 in  the Ministry of Commer ce.  It is currently 
responsible for determining tariff levels, tariff rationaliza tion, and developing the overall tariff structure.  The 
Tariff Commission is also closely invol ved in analysing market access offers received from trading partners in 
the context of WTO negotiations (Tariff Commission online information.  Viewed at:  http://tc.nic.in/new/ 
new_tor.htm [6 October 2006]). 
16 See WTO (2002) for the list of autonomous bodies, which remains unchanged since the previous 
Review. India WT/TPR/S/182/Rev.1 
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Board to provide policy and infrastructural support for increasing exports.  The Government may also, 
from time to time, set up ad hoc groups for advice,  including on trade and related policies.  Dialogue 
is also maintained directly with  industry, through for example, th e Chambers of Commerce, including 
the Confederation of Indian Industry (CII), the Federation of Indian Chambers of Commerce and 
industry (FICC) and the Associated Chambers of  Commerce (ASSOCHAM).  The Internet is also 
increasingly used for soliciting stakeholders' vi ews and comments when formulating laws or 
policies.17 
12. Although India does not have an independent aut hority to review government policy, policy is 
examined on a regular basis through mechanisms such  as parliamentary committees.  The Comptroller 
and Auditor General (CAG) of India,  who is appointed by the President  and is independent of both the 
Executive and Legislative branches of government, audits government accounts both at the central 
and state levels, including those of public sector  enterprises and individual government programmes.18  
The CAG audits include a report on whether govern ment programmes have achieved their objectives 
and provided the intended benefits.  The reports are presented to the President (or the President's 
representative in a State) and then referred to pa rliamentary committees such as the Public Accounts 
Committee (PAC) or the Committee on Public Unde rtakings (CPU) who present their findings and 
recommendations to Parliament.19  Government policies are also  analysed by taskforces and 
committees established on an ad hoc basis.20 
(2) TRADE POLICY OBJECTIVES  
13. Trade policy is seen not as an end in itself, but as a tool to further economic growth and 
development.  The Foreign Trade Policy aims to doub le India's share of global merchandise trade by 
2009, over the 2004 level, and to use trade to generate employment.21  While exports are a key goal, 
the Foreign Trade Policy acknowledges the importan ce of facilitating imports required to stimulate 
the economy and calls for a simplification of impor t procedures and reduction of import barriers, and 
coherence and consistency between tr ade and other economic policies.   
14. Nevertheless, exports co ntinue to be a key focus.  Th e Government in its Medium-term 
Export Strategy, issued in January 2002, target ed compound annual export growth of almost 12% 
over 2002-07, in order to achieve 1% of world expo rts by 2006/07.  The Export Strategy called for, 
inter alia,  further rationalization of ta riffs, tax rebates, reducing tr ansaction costs, improving export 
infrastructure, expanding free-trade agreements , and enhancing the use of export promotion 
programmes to increase exports further.  The goal of doubling India's share of global merchandise 
trade by 2009 is to be achieved, inter alia,  through further liberalization of controls and simplification 
of export procedures, and by "neutralizing the in cidence of all levies and duties on inputs used in 
export products based on the funda mental principle that duties and levies should not be exported".22   
                                                      
17 Recent examples of such interaction with the ge neral public include the Special Economic Zones 
Act, which was put on the Internet in draft stage to so licit comments.  Suggestions are also solicited at the time 
of the formulation of the Foreign Trade Policy and the Ministry of Finance holds a series of meetings with 
stakeholders in the run-up  the annual Budget.   
18 For example, recent CAG reports in clude performance appraisals of government schemes such as the 
Accelerated Irrigation Benefit Prog ramme, National AIDS Control Programme, and Empowerment of the 
Disabled Programme. 
19 Comptroller and Auditor General of India online information.  Available at:  http://cag.nic.in/ 
[11 April 2006]. 
20 Recent examples include:  th e Committee on (direct and indirect) Tax Policy established by the 
Minister of Finance. 
21 Ministry of Commerce and Industry (2006 c), Preamble, Department of Commerce. 
22 Ministry of Commerce and Industry (2006c), Preamble. WT/TPR/S/182/Rev.1 Trade Policy Review 
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15. To implement this policy, there are a number of  duty-neutralizing schemes.  In addition to 
measures existing at the time of the previous Review of India, such as the export promotion capital goods scheme, export-oriented units, technology pa rks, free-trade zones and duty drawback, new 
schemes have been added.  These include sectoral initiatives in agriculture and village industries, 
handicrafts and handlooms, gems and jewellery, and leather and footwear.  By reducing import 
barriers, through improved and faster customs cleara nce and reduced or no import duties, it is likely 
that these schemes are facilitating exports of the targeted products.  Ho wever, duty forgone from 
export promotion schemes in 2004/05 was estimated at  over Rs 354 billion, suggesting that their cost 
is high.  The new schemes add to the already complex network of measures, which, according to a 
report by the Planning Commission, resulted in  "administrative difficulties in monitoring".
23 
(3) TRADE AGREEMENTS AND ARRANGEMENTS  
(i) World Trade Organization 
16. India was an original Member of the WTO a nd provides MFN treatment to all Members and 
other countries.24  It has accepted the Fourth and Fifth Prot ocols and is a Member of the Information 
Technology Agreement.25  It is not a party to the WTO Gove rnment Procurement Agreement (GPA). 
17. Like all Members, India is required to make regul ar notifications on its trade-related laws and 
measures (Table AII.1).  
18. India is an active Member of the WTO.  In the current negotiations, it has submitted proposals 
relating to, inter alia,  agriculture, non-agriculture market access (NAMA), services, disputes, 
competition policy, trade facilitation, rules, TRIPS,  and special and differential treatment.  A number 
of these proposals were made jointly with othe r Members and in many instances with developing 
countries, including the G-20, G-33, and NAMA-11 groups.  India's position prior to the launch of the Doha Round of negotiations placed emphasis on s ecuring the objectives ou tlined in the mandated 
negotiations and the implementation issues raised by a number of developing countries.  At the 
Ministerial Conference in Cancun, in September 2003, and in Hong Kong, China in December 2005, 
India stressed the need to address agricultural su bsidies in rich countries and tariff and non-tariff 
barriers maintained by these countries on products  of export interest to developing countries.
26  India 
believes that the interests of its 650 million ru ral poor, who are dependent on agriculture for a 
livelihood, cannot be jeopardized.  It is theref ore emphasizing special and differential treatment 
through proportionately lower overall bound tariff reduction commitments by developing countries, 
coupled with a special safeguard mechanism and a lis t of special products vital to ensuring livelihoods 
and food security of farmer s in developing countries.27   
19. With regard to NAMA, India, along with its coalition partners, believes that:  progress must 
be made on achieving a fair, balanced, and deve lopment-oriented set of modalities based on the 
                                                      
23 This was already a conclusion reached by the Planning Commission's Advisory Group on Tax Policy 
and Tax Administration in 2001, which noted that although the aim of the schemes was to strip export goods of 
all duties, "to achieve this there was a multiplicity of schemes and procedures which certainly result in 
administrative difficulties in monitoring" (Planning Commission, 2001). 
24 India does not receive MFN treatment from Pakistan , whose list of items that can be traded with 
India has expanded from 600 at the time of the previous Review of India to 1,075 (Taneja, 2006). 
25 India accepted the Fourth and Fifth Protoc ols, respectively, on 10 November 1997 and 
9 December 1998. 
26 WTO documents WT/MIN(03)/ST/7, 10 September 2003 and WT/MIN(05)/ST/17, 
14 December 2005. 
27 WTO document WT/MIN(05)/ST/17, 14 December 2005. India WT/TPR/S/182/Rev.1 
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mandated principles of placing development concerns at the heart of the negotiations;  ensuring less 
than full reciprocity in reduction commitments fo r developing countries;  achieving a comparable 
level of ambition with regard to agricultural ma rket access;  and appropriate flexibilities to manage 
adjustment costs and address development needs.28  On services, India seeks increased market access 
especially through liberalization of professional services trade in modes 1 and 4, while securing a 
balance in the outcome of commitments across all modes and sectors and the negotiations on domestic 
regulations.  As the current round is considered to be a development round, India emphasizes that 
meaningful and effective special and differential tr eatment must be integral to the negotiations in 
accordance with the mandate, and that issues of par ticular concern to develo ping countries should be 
addressed. 
20. Since 2002, India brought complaints with regard to Members' anti-dumping and 
countervailing measures, rules of origin, and tariff pr eferences to developing countries in the WTO.  It 
has also been involved in five cases as defendant  covering issues relating to the automotive sector, 
import restrictions, and anti-dumping measures (Table AII.2).  In addition, India has been involved as 
third party in 16 cases brought to the DSB since 2002.29 
(ii) Regional trade agreements 
(a) Overview 
21. Although India has been a firm supporter of multila teral liberalization, it has also sought out 
regional trade agreements in recent years.  While I ndia continues to attach primacy to the multilateral 
trading system to improve living standards, it believ es that RTAs are building blocks that supplement 
the gains from multilateral trade liberalization.  Since signing the Bangkok Agreement in 1975, India 
has signed agreements mainly with other devel oping countries (such as the GSTP) and within the 
region (SAFTA), and with some of its neighbour s.  Current negotiations include strengthening 
regional ties, for example, through the South As ian Association for Regi onal Cooperation and the 
BIMST-EC, but India is also seeking to develop ties with other regional groupings, such as ASEAN 
and MERCOSUR.  Recent trade agreements, includi ng with Singapore, go  beyond negotiations on 
goods, to include services and investment (Table II.1). 
Table II.1 
India's commitments under regional trade agreements, 2007  
Agreement Trade in goods Trad e in services Other areas 
SAFTA Non-LDC members, including India are to 
reduce tariffs to 20% with in two years, followed 
by a reduction to 0-5% in five years (six years for Sri Lanka) and three years for imports from LDC members.  India has a negative list of 
744 imports from LDCs and 865 items from non-
LDC members that are excluded from tariff 
reduction commitments.
a  The first tariff 
reductions came into effect on 1 July 2006. n.a. n.a. 
Asia Pacific Trade 
Agreement (Bangkok 
Agreement) Tariff preferences for 570 HS six-digit tariff lines 
and an additional 48 tariff lines for LDC members with margin of preference ranging from 5% to 100%.  Special concession on some items have also been extended to the LDCs. n.a. n.a. 
Table II.1 (cont'd) 
                                                      
28 WTO document TN/MA/W/79, 6 July 2006. 
29 WTO documents DS244;  DS257;  DS264;  DS265;  DS266;  DS267;  DS270;  DS283;  DS287;  
DS290;  DS294;  DS315;  DS320;  DS321;  DS322;  and DS335. WT/TPR/S/182/Rev.1 Trade Policy Review 
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Agreement Trade in goods Trad e in services Other areas 
BIMST-EC Framework Agreement signed in February 2004  
to form a free-trade area by 2012 with an additional five years given to the LDC members.  Negotiations on trade in goods were to be 
completed by the end of 2005, but are yet to 
conclude.  Negotiations on services and investment have commenced and must be 
concluded by 2007. n.a. n.a. 
GSTP Tariff concessions of 10%-50% on 53 tariff lines 
at the HS six-digit level.  Tariff concessions of 50% apply to three tariff lines and are available only to Bangladesh, Benin, Guinea, Haiti, 
Mozambique, Sudan, and Tanzania. n.a. n.a. 
Special preferential 
areas  Tariff preferences for certain imports from 
Mauritius, Seychelles, and Tonga. n.a. n.a. 
Afghanistan Tariff reductions on 38 HS six-digit tariff lines, 
with margins of preferences of 50% or 100% of 
the MFN tariff in force from 13 May 2003. n.a. n.a. 
Nepal Tariff exemptions for all goods subject to rules of 
origin.  Imports of certain goods (vanaspati, copper products, acrylic ya rn and zinc oxide) are 
subject to annual quotas.  n.a. n.a. 
Singapore (CECA) Zero duty as of 1 August 2005 for 506 HS 
eight-digit products covered by the early harvest 
programme.  Phased reduction and elimination of 
duty by 1 April 2009 for 2,202 HS eight-digit products and phased reduction of duty by 50% by 1 April 2009 for 2,407 HS eight-digit products.  Some 6,500 HS eight-digit products are excluded from duty reductions. Services included are:  business 
services, communication 
(telecommunications and 
audiovisual), construction, distribution, financial (banking), health, tourism, recreational and transport (maritime) services.  
Temporary movement of natural 
persons and media are addressed 
in separate chapters. Investment, 
standards, SPS, 
intellectual property 
rights, science and technology, education and 
dispute settlement. 
Sri Lanka Zero duty as of 1 March 2000 for over 
1,000 tariff lines and a 50% margin of preference for all other items except 429 items on a negative list.  Tariff concessions on textiles are 25% 
below the MFN rate.  Tariff quotas apply to tea 
and garments and vanaspati.  Total quantum of 
import restricted to 250,000 tonnes per annum. n.a. n.a. 
Thailand Early harvest scheme for 82 products at the 
HS six-digit level;  tariffs to be reduced in phases from 1 September 2004 and to be eliminated by 
1 September 2006. n.a. n.a. 
n.a.  Not applicable. 
a India has offered Bangladesh market access for 8 million pieces of  garments, of which 3 million us ing fabrics of Indian origi n, 
three million using fabrics either  of Indian or Bangladesh orig in and two million unconditionally.  These are part of India's 
sensitive list. 
Source:  Ministry of Commerce and Industry online information.  Viewed at:  http://commerce.nic.in/India_rta.htm, 
[16 May 2006]. 
(b) South Asian Association for Regional Co-operation  
22. The SAARC, an agreement for regional cooperation among Bangladesh, Bhutan, India, 
Maldives, Nepal, Pakistan, and Sri Lanka, was esta blished at the first SAARC Summit in Dhaka on 
7-8 December 1985.  In April 1993, the members of SAARC signed the SAARC Preferential Trading 
Arrangement (SAPTA), which pr ovided limited preferential market access.  The Agreement on a 
South Asia Free Trade Area (SAFTA) was signed during the 12th SAARC Summit, held in Islamabad, 
Pakistan, on 4-6 January 2004.  The preference s exchanged under SAPTA will continue to be 
available to SAPTA members until the tariff liber alization under SAFTA is  complete (2008 for 
non-LDC member preferences for LDCs and 2012 for LDC members). India WT/TPR/S/182/Rev.1 
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23. Following three rounds of SAPTA negotiations, in  which India offered tariff concessions at 
the HS six-digit level on 2,576 lines, additional concessions were given on 364 HS six-digit level 
lines in the fourth round.  Special concessions ar e granted for least developed country members 
(Bangladesh, Bhutan, Maldives, and Nepal).  Tariff reductions under the SAFT A are expected to be 
phased in by 2008 for non-LDC member preferenc es for LDCs (including India) and by 2012 for 
LDC members of SAFTA (Table II.1).  SAFTA members have also excluded certain products from tariff reductions:  India has notified 744 im ports from LDC members and 865 from non-LDC 
members.
30  The first tariff reductions under SA FTA came into effect on 1 July 2006.31 
(c) Asia Pacific Trade Agreement 
24. The Asia Pacific Trade Agreement (APTA),  originally known as the Bangkok Agreement, 
was signed on 31 July 1975 by Bangladesh, India, Lao PDR, Republic of Korea, Philippines, 
Sri Lanka, and Thailand;  China acced ed to the Agreement in April 2001.32  The APTA entered into 
force on 1 September 2006 under an amendment to the original agreement.33  India offers tariff 
preferences on some 570 tariff lines at the six-digit level, and an additional 48 tariff lines to LDC 
members.  
(d) BIMST-EC 
25. The Bay of Bengal Initiative for Multisectoral, Technical and Economic Cooperation 
(BIMST-EC), originally known as BIST-EC was si gned on 6 June 1997 by Bangladesh, India, 
Sri Lanka, and Thailand;  Myanmar joined the agre ement in 1997, and Nepal and Bhutan joined in 
2004.  In February 2004, BIMST-EC members signe d a Framework Agreement to form a free-trade 
area by 2012.  Although this agreement provides for negotiations to be concluded on goods by 
December 2005, and on services and investment by 2007, these deadlines have not been met due to 
the complexity of issues involved and economic and political developments in member states. 
(e) Agreement with Sri Lanka 
26. India signed a free-trade agreement with Sri Lanka on 28 December 1998, which entered into 
effect on 1 March 2000.  Under the FTA India reduce tariffs in phases,  and eliminate them completely 
in March 2003, except for a negative list compri sing 429 items including garments, plastics and 
rubber, alcoholic spirits, and coconut oil.34  India also maintains tariff quotas on tea and garments 
under the FTA.  The tariff quota for tea is currently  15 million kg per year, at a preferential rate of 
50% of the MFN duty.  The tariff quota for garmen ts is 8 million pieces per year, of which 6 million 
should be manufactured using fabrics of Indian origin  and enter at zero rates of duty;  the remaining 
two million pieces receive a margin of preference of 75%  of the MFN rate.  In addition, imports of tea 
may only enter through the ports of Kochi and Kolkat a, while garments may be imported only through 
                                                      
30 Least developed country members (Bangladesh, Bhutan, Maldives, and Nepal) are to reduce existing 
tariffs to 30% by 1 January 2008;  tariffs already below 30% will be reduced annually by a 5% margin of 
preference for each of the two years fo llowed by a reduction of remaining tariffs to 0-5% by 1 January 2016.30  
(SAARC Secretariat online information.  Viewed at:  http://www.saarc-sec.org/main.php?t=1 
[26 September 2006]).  
31 Tariff notifications 67-69 of 2006.  View ed at:  http://www.cbec.gov.in/cae/customs/cs-
act/notifications/notfns-2k6/cs-notf ns-tarr06.htm [2 October 2006]. 
32 WTO document WT/COMTD/N719, 29 July 2004. 
33 UNESCAP online information.  Viewed at:  http://www.unescap.org/tid/apta/ta_amend.pdf 
[27 September 2006]. 
34 Sri Lanka was expected to eliminate its tariffs on imports from India by 2008 (Ministry of 
Commerce and Industry online information.  Availa ble at:  http://commerce.nic.in/India_rta.htm, 
[16 May 2006]). WT/TPR/S/182/Rev.1 Trade Policy Review 
Page 26 
 
 
the ports of Chennai, Mumbai, and Jawaharlal Ne hru Port, Mumbai.  Furthermore, according to a 
Public Notice issued by the Directorate General of Foreign Trade on 21 November 2006, imports of 
vanaspati, including bakery shorte ning and margarine, are subject to  an "overall quantitative limit" of 
250,000 tonnes per year under the Indo–Sri Lanka Free Trade Agreement.35  The agreement also has 
provisions for the use of anti-dumping and safeguard  measures as well as provisional suspension of 
preferences in case of balance of payments difficulties. 
27. India and Sri Lanka are currently negotia ting a Comprehensive Economic Partnership 
Agreement (CEPA), which would include trade in services and economic cooperation in other areas.  
According to the authorities, no date has been  set for completion of the negotiations.   
(f) Comprehensive Economic Cooperation Ag reement with Singapore (CECA) 
28. The CECA was signed on 29 June 2005 and became effective on 1 August 2005.  The 
agreement was the first signed by India that covered not only goods, but also services and investment.  
Tariff concessions are to be phased in between 1 August 2005 and 1 April 2009 (Table II.1).  Products 
excluded from commitments, including agricultura l products, alcoholic be verages, minerals, 
chemicals, rubber products, and tex tiles and clothing products (6,551 tariff lines or over half of the 
tariff), will remain subject to MFN duties.  Cu rrently, India offers tariff preferences at the 
HS eight-digit level on some 5,111 lines, although the MFN tariff on several of these lines is already 
zero, implying that preferences are effectively offered on only 4,884 tariff lines (Chapter III). 
29. India's commitments on financial services go beyond its commitments in the GATS, including 
commitments in life insurance services, additiona l commitments in non-life insurance, commercial 
presence for three banks from Singapore (DBS Group, United Overseas Bank Limited, and Overseas 
Chinese Banking Corporation Limited) including up to 15 branches over four years, subject to certain 
limitations and higher equity limits in  local banks (Chapter IV(5)(iii)(a)). 
30. In the investment chapter, commitments were made to protect investment, including through 
specific commitments on expropriation and compensa tion for any expropriation.  The CECA also 
exempts investment from Singapore from capital gains taxation.36 
(g) Framework Agreement for Establishing a Free Trade Area with Thailand  
31. The Framework Agreement for establishing a Free Trade Area was signed by India and 
Thailand on 9 October 2003.  Although the text of  the agreement covers trade in goods, services and 
investment, specific commitments were made only with  regard to trade in goods.  An early harvest 
scheme includes phased tariff elimination for 82 products at the HS six-digit level, by 
1 September 2006. 
(h) Other regional trade arrangements 
32. Consultations between India and ASEAN Economic Ministers were held on 
15 September 2002 when it was decided to establish an ASEAN–India Economic Linkages Task Force (AIELTF) to prepare a draft Framework Agre ement to enhance bilateral trade.  The first 
ASEAN–India Summit was held on 5 November  2002 in Cambodia, where India committed, 
                                                     
 
35 DGFT notification No. 32 (RE 2006).  Viewed a t:  http://dgft.delhi.nic.in/ [2 October 2006] and 
DGFT Public Notice No. 69 (RE-2006)/2004-09.  Viewed at:  http://dgft.delhi.nic.in/ [18 January 2007].  
36 According to the authorities, the concession to Singapore on capital gains taxation coexists with the 
India–Mauritius double tax avoidance agreement and will be available to Singapore only as long as India continues to extend a similar concession to Mauritius. India WT/TPR/S/182/Rev.1 
 Page 27 
 
 
inter alia,  to provide special and differential treatment to ASEAN members based on their level of 
development, and to aligning its peak  tariffs to east Asian levels by 2005.    
33. The Framework Agreement on Comprehensive Economic Co-operation was signed by India 
and ASEAN heads of state on 8 October 2003.  Th e agreement includes trade in goods, services, and 
investment.  The early harvest programme, including exchange of tariff concessions, was expected to 
commence on 1 January 2007.  Closer trade and inv estment ties are also s ought with the European 
Union and the United States, through the India–EU  Strategic Partnership signed on 7 September 2005 
and the US–India Trade Policy Forum, which held it s first meeting on 12 November 2005.  Under the 
former, a High Level Trade Group was established to explore ways to deepen  trade and investment 
relations and reported to the next  summit meeting in October 2006.  A decision was taken to negotiate 
a broad-based trade and investment agreement.  The first meeting of the US–India Trade Policy Forum discussed tariffs and non-tariff barriers to tr ade, agriculture, investment, services, intellectual 
property, and the Doha Round.  It agreed to establish focus groups on agriculture, tariffs and 
non-tariff barriers, services, investment, and innovati on and creativity.  The meetings of the Trade 
Policy Forum are held at regular intervals several times during a year.  
34. India is exploring the possibility of esta blishing a Comprehensive Economic Cooperation 
Agreement with the Southern African Customs Uni on (Botswana, Lesotho, Namibia, South Africa, 
and Swaziland), and has signed preferential agreements with  Afghanistan (6 March 2003), 
MERCOSUR (19 March 2005), and Chile (8 March 2 006).  India's commitments under the PTA with 
Afghanistan include 38 tariff lines at the HS six-digit level, with preferences ranging from 50% to 
100% of the MFN tariff rate.  The PTA has been  in operation since 13 May 2003.  A Framework 
Agreement to Promote Economic Co-operation, whic h aims to identify the potential for cooperation 
in trade in goods and services, investment, and other areas, was signed with MERCOSUR on 
25 January 2004.  As a first step, India h as offered commitments on 450 tariff lines at the 
HS eight-digit level, with preferences ranging  from 10% to 100% of the MFN rate.  Under a 
Framework Agreement to Promote Economic Co-ope ration signed with Chile, on 20 January 2005, 
India's offer includes 178 tariff lines at the HS eight-digit level, with preferences ranging from 10% to 
50% of the MFN rate.
37  In parallel, a meeting of the joint study group was held during the 
preferential trade agreement negotiations in November  2005 to explore the possible next steps.  The 
PTAs with MERCOSUR and Chile are not yet in force.  
35. The bilateral agreement with Nepal was exte nded up to 5 March 2007, apparently without 
change.  India's free-trade agreement with Bhut an, conducted in local currency, was extended on 
29 July 2006 for ten years, while its bilateral trade cooperation agreement with Bangladesh was 
extended for three years, from 1 April 2006.  India also maintains transit agreements with Bangladesh 
and Nepal. 
36. India is negotiating a number of trade agreemen ts including with the Republic of Korea, 
Mauritius, and the Gulf Cooperation Council, and has also set up joint study groups to explore the 
feasibility of comprehensive economic cooperati on agreements with China, Japan, Indonesia, 
Malaysia, Australia, and the Russian Federation. 
                                                      
37 India's offer covers meat and fish products, rock salt, iodine, copper ore and concentrates, chemicals, 
leather products, newsprint, paper and particle boards, some industrial products, and wool (Ministry of 
Commerce and Industry online information.  Availa ble at:  http://commerce.nic.in/India_rta.htm, 
[16 May 2006]). WT/TPR/S/182/Rev.1 Trade Policy Review 
Page 28 
 
 
(iii) Other trade arrangements 
37. India is a participant in the Global System of Trade Preferences (GSTP) among developing 
countries.  Under the GSTP, which entered into fo rce in India on 19 April 1989, India offers tariff 
preferences for a limited number of products.  Two rounds of negotiations have  been completed and a 
third is expected to be completed by 2007.38  It appears also that India is considering giving duty-free 
and quota-free market access to least developed countr ies, but no further details are available.  Under 
the Generalized System of Preferences (GSP), Indi a receives preferential access to the markets of 
Bulgaria, Canada, the European Communities, Jap an, New Zealand, Norway, Russian Federation, 
Turkey, Switzerland, and the United States.39 
(4) FOREIGN INVESTMENT REGIME  
(i) Overview 
38. India has continued to liberalize its foreign invest ment regime gradually since its last Review.  
Procedures for applying for and obtaining FDI approv al are essentially unchanged;  the main changes 
in policy have been to the entry route and a relaxation in equity restrictions in a number of sectors.  FDI policy is formulated by the Department of Indus trial Policy and Promotion (DIPP) in the Ministry 
of Commerce and Industry.  The Investment Promotion Desk and the Foreign Investment 
Implementation Authority, under the Secretariat for Industrial Assistance (SIA) in the DIPP, are 
concerned with investment promotion and facilita ting implementation of approvals.  The Foreign 
Investment Promotion Board (FIPB), based in the Mi nistry of Finance, is responsible for granting 
approval for FDI in sectors/activities where prior government a pproval is required. 
39. A May 2002 report on reforming the investme nt approval and implementation procedures 
concluded that, despite economic liberalization, FD I had not entered India to the degree expected;  
and this was due to several constraints, including in the complexity of procedural requirements of 
several laws and regulations, as well as tr ansparency in the approval procedures.
40  In response, the 
Foreign Investment Implementation Authority (FII A) was established in August 1996.  The FIIA, 
which is based in the DIPP, provides assistance  to foreign investors encountering approval or 
operational difficulties.  The FIIA is assisted by a Fast Track Authority in each sector, and includes 
representatives across the Government, including st ate governments, and agencies involved in the 
particular project.  India also continues to stre amline foreign investment regulations, and reduce or 
remove equity restrictions.  In the latest move to  rationalize policy further, in February 2006 equity 
restrictions were lifted in several activities,  including brewing and distillation of alcohol;  
manufacturing activities in products subject to industria l licensing within 25 km of large cities;  and in 
sensitive sectors such as the manufacture of explos ives and hazardous chemicals, and "greenfield" 
airports, where investment has been permitted under the automatic route subject to sectoral regulations and, where applicable, an industr ial licence under the Industries (Development and 
Regulation) Act.
41 
                                                      
38 Ministry of Commerce online information.  Ava ilable at:  http://commerce.nic.in/india_rta.htm#h16 
[16 May 2006].  Details of the tariff lines covered can be found in Customs notification No. 239/89, 1 September 1989, as amended by notification No. 135/2001-Customs, 31 December 2001 (Viewed at: 
http://www.cbec.gov. in/cae/customs/cs-act/notifications/notfns- before2k/cs236-89c.htm and http://www.cbec. 
gov.in/cae/customs/cs-act/no tifications/notfns-2k1/cs135-2 k1.htm [19 January 2007]). 
39 UNCTAD (2005). 
40 Department of Industrial Policy and Promotions (2002). 
41 Department of Industrial Policy and Promotions (SIA), "Press Note No. 4 (2006 Series)".  Viewed at:  
http://siadipp.nic.in/policy/changes.htm [29 September 2006]. India WT/TPR/S/182/Rev.1 
 Page 29 
 
 
(ii) Legislation and approval procedures 
40. Although there is no specific FDI legislation, FDI policy is incorporated in the Foreign 
Exchange Management (Transfer or Issue of Se curity by a Person Resident Outside India) 
Regulations, 2000, notified under the Foreign Exchange  Management Act, 1999.  Foreign investment 
is at present permitted up to varying levels of equity in most sectors, but it is prohibited in:  retail 
trading (except single brand product retailing);  atom ic energy;  lottery business;  and gambling and 
betting (Table AII.3). 
41. There are two routes for FDI.  FDI up to 100% may take place through the automatic route, 
requiring only a notification to the regional office of the Reserve Bank of India (RBI) within 30 days 
of receipt of the investment and within 30 days of issuing shares to foreign investors.  The automatic 
route is permitted for all activities except:  invest ment in two industries subject to compulsory 
industrial licensing (manufacture of cigars and ci garettes of tobacco produc ts, and defence-related 
items);  equity investment above 24% for manufact ure of items reserved for the small-scale sector;  
where the foreign partner has an existing venture in India in the same field on 12 January 2005 (except where investment is by a venture capital fund registered with the Securities and Exchange 
Board of India (SEBI);  where investment by either pa rty is less than 3% in the existing joint venture;  
and if the existing joint venture is defunct or sick );  and investment in certain sectors, as specified, 
above the overall permitted foreign equity ceilings (Table AII.3). 
42. In such cases, prior approval is required by th e Government.  Proposals are considered by the 
FIPB in the Ministry of Finance, Department of Economic Affairs (DEA).  Applications seeking FIPB 
approval are received in the DEA, except for i nvestment proposals by non-resident Indians, for 
single-brand product retailing or in an export-oriented unit, which are received and processed by the 
DIPP.  Investments in an Indian company under th e Portfolio Investment Scheme are not covered by 
the FDI policy and require prior approval from the Securities and Exchange Board of India (SEBI), 
while foreign investors setting up branches, liais on or project offices would be covered by the 
provisions of the Foreign Exchange Management (E stablishment of a branch/liaison office or project 
office in India) Regulations 2000, under the Foreign Exchange Management Act (FEMA).
42  
43. Foreign investment proposals must be accompanied by details of all investors;  existing or 
proposed activities;  details of the project, incl uding cost, proposed employment, and exports and 
foreign exchange requirements;  and financial details of the company, such as paid up capital, 
percentage held by foreign or non-resident investors,  and any shares to be issued or already issued.  
FIPB decisions must normally be made and communi cated to the investors within 4-6 weeks unless 
additional information on the proposal is required.   According to the authorities, normally these 
deadlines are met on 90% of proposals, provided information is complete.  The FIPB works within 
established guidelines, considering, inter alia,  whether the project meets certain norms such as value 
added or export earnings (for export-oriented units or the small-scale secto r), and whether it involves 
technical collaboration, along with the nature of the technology to be transferred.43  Approval by the 
FIPB is subject to clearance being obtained under relevant national and stat e laws and regulations.  
Once approval has been granted, the investor mu st obtain clearance from other central or state 
government agencies, including those responsible  for foreign exchange, pollution control and 
environmental clearance as well as land acquisition, power, etc.  The number of clearances required from individual agencies, and the time taken for each, were among the major bottlenecks identified by 
                                                     
 
42 Ministry of Commerce and Industry (2006b). 
43 Guidelines to be considered by the FIPB when examining FDI proposals are contained in Ministry of 
Commerce and Industry (2005), Annexure I. WT/TPR/S/182/Rev.1 Trade Policy Review 
Page 30 
 
 
the Committee to examine investment pro cedures and implementation in September 2001.44  T o  
address this problem, several states have established single-window approval systems for investment proposals made within the state.  In addition, sect oral guidelines are being reviewed to streamline 
them and render them more transparent. 
(iii) Incentives 
44. While no incentives are targeted specifically at  foreign investors, both central and state 
governments provide investment incentives for dom estic and foreign investors.  The Central 
Government's incentives include a 100% tax exempti on on profits for infrastructure development and 
operation;  a tax exemption for exports for a period of ten years;  a tax exemption for the 
first five years and a 50% exemption for the next five years, for investors in the Special Economic 
Zones.  There are also capital investment subsidi es for new industrial units and for expansion of these 
units in the north-eastern region and states that ar e covered by a special package scheme, introduced 
in January 2003;  the incentives include a subsidy of 15% of investment in plant and machinery, up to a maximum of Rs 3 million for all new units and fo r expansion of existing units.  Similar schemes 
also exist for the state of Jammu and Kashmir.   State governments offer inv estment incentives mainly 
in the form of exemptions on the payment of charges for electricity, registration fees, and stamp duty, 
as well as reservation of land, inter alia,  for export-oriented units and foreign investors.
45 
(iv) Investment agreements 
45. Since 1 January 2002, India has signed 16 bilatera l investment agreements, of which 8 are yet 
to be ratified.  Of the agreements signed before 1 January 2002, 10 have entered into force since 
1 January 2002.46 
46. India has signed seven treaties on avoidance of double taxation since 2002, of which three are 
revisions or amendments to previous treaties.47  Some of these treaties have "tax sparing" provisions. 
 
                                                      
44 For example, Annex IX shows the downstream approval requirem ents for a company, involving 
different state and central government agenci es (Government of India, 2002, p. 81). 
45 Ministry of Commerce and Industry (2004). 
46 Argentina (12.08.2002), Belarus (23.11.2003), Ch inese Taipei (25.02.2005), Croatia (19.01.2002), 
Cyprus (12.01.2004), Finland (09.04.2003), Hung ary (02.01.2006), Indonesia (22.01.2004), Kuwait 
(28.06.2003), Lao PDR (05.01.2003), Mongolia (29.04.2002), Portugal (19.07.2002), Tajikistan (14.11.2003), 
Turkmenistan (27.02.2006), Ukraine (12.08.2003), and Yemen (10.02.2004) (Ministry of Finance online 
information.  Viewed at: http://www.finmin.nic.in/the_ministry/dept_eco_affairs/investment_div/invest_ index.htm#Background_and_salient_features [8 June 2006]). 
47 The treaties were signed with:  Armenia (31.10.2003), Hungary (revision:  03.11.2003), Malaysia 
(revision:  14.05.2001), Singapore (amendment:  29.06.2005), Slovenia (13.01.2003), Sudan (22.10.2003), and Uganda (30.04.2004). India WT/TPR/S/182/Rev.1 
 Page 31 
 
 
Annex II.1:  Trade-related technical assistance1 
 
1. Since 2002, India has been the beneficiary of trade-related technical assistance provided both 
bilaterally and through the WTO.  Since 2002, some  140 technical assistance projects on trade policy 
and regulations, and over 130 on tr ade development were reported by  Members, multilateral agencies, 
and the WTO Secretariat.  Officials from the Indian  Government have also participated in the WTO 
trade policy courses. 
2. Assistance by the WTO Secretariat has been mainly related to the WTO Agreements, 
including through national seminars on technical barriers to trade, and sanitary and phytosanitary 
issues.  Members and other multilateral institutions  have provided the bulk of trade development 
assistance, including for business development and ma nagement, trade and inv estment promotion, and 
trade promotion strategies.  India looks forward to  receiving technical assistan ce in capacity-building 
activities and would like to raise the awareness of its scientists and technicians on the trade-related 
implications of SPS and TBT requirements.  India would also like to build a world-wide database on 
SPS and TBT requirements in other countries.  With re gard to TRIPS, India would like to sharpen the 
skills of its patent examiners. 
3. India has also hosted a number of regional se minars and workshops (provided by Members 
and the WTO Secretariat) on a range of issues related to the WTO Agreements, including trade mainstreaming in development plans, technical barri ers to trade, sanitary and phytosanitary measures, 
customs valuation, regional trade agreements, di spute settlement, trade-related intellectual property 
rights, agriculture, services, tariff negotiations, and rules. 
 
                                                     
 
1 This section is based largely on the Doha Development Agenda Trade Capacity Building Database 
established by the WTO jointly with the OECD.