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India’s Duty-Free Tariff Preference (DFTP) Scheme for LDCs

24 Oct 2025 GS 3 Economy
India’s Duty-Free Tariff Preference (DFTP) Scheme for LDCs Click to view full image

Context:

India beats China in duty-free access to poor nations

Background

  • Introduced: 2008

  • The Duty Free Tariff Preference (DFTP) scheme is a unilateral trade policy by India to grant tariff preferences to Least Developed Countries (LDCs).

  • Framework: Under the World Trade Organization (WTO) mechanism for market access to Least Developed Countries (LDCs).

  • Objective: To promote South–South cooperation, facilitate inclusive global trade, and strengthen regional economic integration.

Key Features

  1. Tariff Coverage

    • Covers 94.1% of all tariff lines, one of the broadest schemes among developing nations.

    • Provides over 90% duty-free access for LDC exports.

    • Developed countries like Australia, New Zealand, Norway, and Switzerland offer 100% duty-free access.

  2. Preferential Margins

    • Average global preference: 15.1 percentage points.

    • For agricultural goods: 29.7 percentage points among the highest globally.

  3. Products Covered

    • Key sectors benefiting:

      • Agriculture: coffee, tea, processed food

      • Textiles and leather

      • Minerals and basic commodities

Preferential Margin :

It means the difference between the normal import duty that a country charges on goods and the lower (or zero) duty it gives to certain countries under a trade preference scheme.

Example:

  • Suppose India normally charges 20% import duty on coffee.

  • But under the DFTP Scheme, India allows LDCs (Least Developed Countries) to export coffee duty-free (0%).

Then, the preferential margin = 20% – 0% = 20 percentage points.

In short:

Preferential margin = How much advantage (in % points) an exporting country gets compared to others, due to reduced or zero import duties.

Impact and Global Standing

  • India ranked as the 5th-largest export destination for LDCs (2024):

    • China – 25%

    • EU – 17%

    • UAE – 12%

    • US – 9%

    • India – 6.8%

  • LDC exports to India (2024): USD 21.5 billion, largely in minerals, agriculture, and textiles.

  • Key Beneficiaries: LDCs in Asia and Africa.

Prelims Practice MCQ

Q. Which of the following sectors benefits most from India’s DFTP Scheme?

  1. Agriculture (coffee, tea, processed food)

  2. Textiles and leather

  3. Pharmaceuticals

  4. Minerals

Select the correct answer using the code below:
A. 1 and 2 only
B. 1, 2 and 4 only
C. 2 and 3 only
D. 1, 2, 3 and 4

✅ Answer: B. 1, 2 and 4 only

Q. Which of the following statements regarding the DFTP Scheme is correct?

A. It provides 100% duty-free access to all LDC exports.
B. It is implemented under India’s Free Trade Agreement with ASEAN.
C. It is a unilateral scheme under the WTO framework.
D. It applies only to LDCs in the SAARC region.

✅ Answer: C. It is a unilateral scheme under the WTO framework.



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