Forced labour and import: Reading India’s latest foreign trade policy additions

The Directorate General of Foreign Trade (DGFT), on July 13, 2026, quietly rewrote a small but consequential part of India’s trade rulebook. Notification No. 23/2026-27 inserts Paragraph 2.20B into the Foreign Trade Policy 2023, prohibiting the import of goods produced wholly or in part through forced labour. Additionally, Paragraph 11.64 has defined “forced labour” as per the International Labour Organization’s (ILO’s) 1930 convention. The provision takes effect 30 days after publication in the gazette. The reading of the insertion of these paragraphs may be done in several ways.

First, India has long prohibited forced labour. Article 23 of the Constitution of India and the Bonded Labour System (Abolition) Act, 1976, explicitly ban forced or bonded labour in the country. India, as one of the founding members of the ILO, has ratified the conventions regarding forced labour. However, a trade-side mechanism was missing. Para 2.20B closes that gap and empowers the government to stop a shipment if forced labour is used in the commodities. This policy does not impose an automatic blanket ban on imports; instead, it provides an enabling framework for the DGFT to investigate specific goods and recommend prohibitions based on the use of forced labour.

Second, although the notification is country-neutral, global debates on forced labour have largely centred around allegations concerning China, particularly the Xinjiang province, where several products, including textiles and solar-grade polysilicon, have been subjected to heightened scrutiny because of forced labour. Forced labour is a kind of input-cost subsidy that suppresses the production cost of the commodity and undercuts market competition, harming the interests of domestic industry in the importing country. Chinese firms have been dumping their produce in the Indian market over the years. Additionally, in the current context of the ongoing India-US trade deal, several experts have warned of an increased import surge from China. By issuing this notification, India gets one more policy instrument to deal with unfair market activity apart from the anti-dumping framework.


Third, with this notification in place, India has tried to put a protective layer for the domestic industry from unfair foreign competition. Indian producers may experience an incentive to scale up without the constant threat of being undercut by artificially cheap imports. In the long term, such measures may also incentivise foreign firms to set up their shops in India, as the adoption of forced labour prohibition regulations worldwide may throttle their supply chain and restrict market access.

Fourth, this notification may be seen as a strategic move. Under Section 301 of the Trade Act, 1974, the US has investigated economies that failed to properly enforce forced labor prohibitions and has proposed a 12.5% tariff on 54 economies, including India. This notification conveys that India neither manufactures nor imports goods using forced labour. In the context of the ongoing trade negotiation, the political message is clear: our exports are responsibly sourced. In a way, this notification tries to securitise the US market for India.

However, this may carry some downsides as well. First is the implementation challenge. How will evidence of forced labour be collected? Who is responsible for providing evidence: the exporter or the importer? Can firms appeal? These enforcement nitty-gritties must be in place to reduce the business uncertainty.

Second is India’s increasing dependence on Chinese inputs, which has deepened over the years. Pharmaceutical manufacturing runs on Chinese active pharmaceutical ingredients. Electronics assembly depends on Chinese components. Even India’s most ambitious industrial commitments—Net-Zero by 2070, the EV transition, and a domestic shipbuilding push—rest on critical mineral supply chains that are substantially controlled by China.

Third is the policy inconsistency. Through Press Note 3 (PN3) in 2020, India had placed restrictions on foreign direct investment (FDI) to curb opportunistic takeovers. Earlier this year, India eased Press Note 3 (PN3) to allow land-bordering countries, including China, to take non-controlling stakes of up to 10% through the automatic route. This signals that India is now ready to welcome investment with careful calibration, but in terms of critical trade inputs, India is becoming hesitant.

Fourth, a further complication is in terms of FTAs. India is simultaneously pursuing multiple FTAs, which generally run on multi-stage production chains. Tracing forced-labour content through several tiers of suppliers is, in practice, a cumbersome task. India’s FTA utilisation has not been very promising, and the forced-labour provision may further drag this ratio down.

In short, India has started well by filling the gaps. Moreover, the notification buys diplomatic capital at a moment India needs it. However, going forward, it must be careful. The government should be watchful of industry stress indicators. A rule that is easy to state and hard to enforce carries its own kind of policy risk. This may drag down export competitiveness if the provisions are not executed smoothly. If the enquiries are transparent, evidentiary, and narrowly product-specific, this becomes a credible instrument against a real problem. If they become opaque or expansive, Para 2.20B may transform into a kind of non-tariff barrier.

Himanshu Jaiswal is a Consultant at the Centre for Social and Economic Progress (CSEP), New Delhi. Badri Narayanan Gopalakrishnan is a Visiting Senior Fellow at the Centre for Social and Economic Progress (CSEP), New Delhi.