Directorate General of Foreign Trade (DGFT): Meaning, Functions, and Role in Import Export

The Directorate General of Foreign Trade (DGFT) is India’s main agency for managing international trade through the Foreign Trade Policy. It oversees exports and imports and issues the mandatory Importer-Exporter Code (IEC). DGFT supports entrepreneurship by helping businesses with licences, incentives, training, and digital compliance, while ensuring global trade standards are followed. By simplifying procedures, promoting competitiveness, and encouraging market diversification, it enables entrepreneurs and MSMEs to grow internationally. Recent initiatives focus on modernisation, sustainability, and boosting India’s economy through easier and more efficient trade processes.

What is the Directorate General of Foreign Trade (DGFT)?

The Directorate General of Foreign Trade (DGFT) is an Indian government agency under the Ministry of Commerce & Industry that implements India’s Foreign Trade Policy (FTP). It promotes exports and facilitates imports by regulating trade laws, issuing licences—such as the mandatory Importer-Exporter Code (IEC)—and providing guidance and incentives to businesses. For entrepreneurs planning to start an export business or start an import business, obtaining an IEC is the first legal step handled by DGFT. Before economic liberalisation, DGFT mainly controlled trade, but today it acts as a “facilitator,” shifting from restrictions to supporting international commerce and boosting India’s economy.

Role of DGFT in import export?

1. Regulation: Oversees and regulates India's import and export activities.
2. Import Export Code (IEC): Issues the mandatory Import Export Code (IEC) for businesses to conduct international trade.
3. Policy formulation: Develops and implements the Foreign Trade Policy.
4. Licenses and permits: Grants necessary licenses and permits for importing and exporting goods.
5. Incentives: Provides export incentives and schemes to boost trade.
6. Compliance: Ensures compliance with international trade regulations and standards.
7. Trade facilitation: Streamlines procedures and reduces barriers for smooth trade operations.
8. Trade Data: Collects and disseminates trade data for policy-making and analysis.

The DGFT plays a pivotal role in facilitating and regulating India's international trade, ensuring businesses have the necessary tools and compliance frameworks to thrive globally.

Objectives of DGFT

• Promote trade: Enhance India's exports and imports through effective policies.
• Simplify procedures: Streamline trade processes and reduce bureaucratic hurdles.
• Increase competitiveness: Improve the global competitiveness of Indian goods and services.
• Diversify markets: Expand export markets and reduce dependency on limited countries.
• Ensure compliance: Adhere to international trade regulations and standards.
• Support MSMEs: Provide support and incentives to Micro, Small, and Medium Enterprises MSMEs.
• Sustainable growth: Encourage environmentally sustainable trade practices.
• Economic growth: Contribute to the overall economic development of India.

Functions of DGFT

The functions of the DGFT are as follows:

• Policy Implementation: Carries out India’s Foreign Trade Policy (FTP) to promote exports and regulate imports.
• Licensing & Regulation: Issues licences, including the essential Importer-Exporter Code (IEC), and controls restricted or sensitive goods.
• Trade Facilitation: Provides a digital platform for e-services, shares market information, and simplifies procedures for businesses.
• Export Promotion: Supports schemes like “Make in India,” assists export promotion councils, and helps Indian industries compete globally.
• Database Management: Maintains a record of all Indian exporters and importers.
• Trade Agreements: Oversees trade under agreements and encourages regional and international trade.
• Quality & Compliance: Handles quality complaints and manages trade-related data such as ITC-HS codes.

Services offered by the Directorate General of Foreign Trade (DGFT) for exporters

• Import export code (IEC): Issuance of mandatory IEC for export activities.
• Licensing: Provision of various export licenses and permits.
• Export Incentives: Administration of incentive schemes like the Merchandise Exports from India Scheme (MEIS).
• Policy guidance: Providing guidance on export policies and regulations.
• Trade facilitation: Streamlining export procedures to reduce barriers.
• Training programs: Conducting workshops and training for exporters.
• Market access: Assistance in accessing new international markets.
• Trade data: Supplying essential trade statistics and market information.
• Dispute resolution: Resolving export-related disputes and issues.
• Support services: Offering advisory and consultancy services for exporters.

Ways how DGFT regulates export from India

1. Mandatory Registrations

• IEC: A 10-digit code linked to PAN, issued by DGFT, required for all import and export activities.
• RCMC: Registration with Export Promotion Councils to access FTP benefits and incentives.

2. Export Policy & Classifications

• ITC (HS) Schedule II: Sets rules for exports.
• Categories: Goods are classified as Free (no licence needed), Restricted (licence required), or Prohibited (not allowed).

3. Strategic Trade Controls (SCOMET)

DGFT monitors dual-use items through the SCOMET list. Special licences are required for sensitive goods or items with potential military use.

4. Export Promotion & Incentive Schemes

• Duty Schemes: Advance Authorization and DFIA allow duty-free import of inputs.
• EPCG: Permits import of capital goods at zero duty in exchange for export obligations.

5. Oversight of State Trading Enterprises (STEs)

Certain sensitive goods, like agricultural products, are routed through designated STEs to stabilise prices nationally.

6. Digital Compliance & Monitoring

• EDI & e-BRC: Electronic systems for trade data exchange and payment verification.
• ICP: Initiatives to ensure businesses comply with trade laws.

Recent updates on DGFT

Electronic Bank Realisation Certificate (eBRC): A modern system using banks’ Inward Remittance Messages (IRMs) lets exporters self-certify eBRCs. From 1 May 2025, a “Mode of Export of Services” field is mandatory for services exports.

IEC Deactivation: IECs not updated as per Notification No. 58/2015-2020 (Feb 2021) may be deactivated. Reactivation requires submitting a modification request.

Export Credit Package: A Rs 7,295 crore package offers interest subvention and easier access to finance for exporters, especially MSMEs.

Product-Specific Updates:

• Natural honey exports capped at USD 1,400 per metric ton until March 2026.
• Import policy revised for Low Ash Metallurgical Coke (Jan 2026).
• Personal carriage of gems and jewellery allowed through Ahmedabad Airport.

Policy & Procedure Updates:

• New rules for refunds and Input Tax Credit (ITC) under the old CGST Rule 96(10).
• Amendments to the Handbook of Procedures (HBP 2023) covering PSIAs and other procedures.

These updates reflect the DGFT's efforts to streamline trade processes and support exporters by providing regulatory relief and extending beneficial schemes.

Conclusion

The Directorate General of Foreign Trade (DGFT) is a key regulatory body under the Ministry of Commerce and Industry in India, responsible for the formulation and implementation of the country's Foreign Trade Policy. It plays a crucial role in promoting and regulating exports and imports, ensuring compliance with international trade regulations. The DGFT issues Import Export Codes (IEC), provides export incentives, streamlines trade procedures, and facilitates access to global markets. By simplifying trade processes and offering guidance, the DGFT supports businesses in navigating international trade complexities. Access to these resources can also aid businesses in securing a business loan for trade expansion and operations. Here are some benefits of a Bajaj Finserv Business Loan:

• High loan amount: Businesses can borrow funds up to 80 lakh, depending on their needs and qualification.
• No collateral required: You do not have to pledge any collateral to get our business loan, which is beneficial for small businesses without substantial assets.
• Competitive interest rates: The interest rates for our business loans range from 14% to 23% per annum.

These features and benefits of business loans make them a highly accessible and practical financial tool for businesses looking to maintain or accelerate their growth.

It's also important to understand concepts like working capital and the working capital cycle to keep your business financially healthy.

Helpful resources and tips for business loan borrowers