The Narcotic Drugs and Psychotropic Substances (NDPS) Act is the primary regulation that governs cannabis and hemp in India. While the NDPS bans the cannabis plant and its byproducts, the law leaves the regulation of hemp policy up to individual states. As long as states can assure the federal government and law enforcement that the plants are not being 'misused', state governments have the ability to establish their own policies on cultivation and sale of hemp.
The country's first indication of a viable hemp industry began in 2010, when the Textile Ministry passed the Natural Fiber Policy, which named the state of Uttarakhand the ideal starting point. Uttarakhand then became India's first state to allow commercial cultivation of hemp in 2017, thanks to the campaigning of local entrepreneurs eager to bring hemp products to India's health and wellness scene. The legalization was only partial though, as all farmers were required to sell their crops to the government only. Additionally, a licensing scheme was put in place, as was a limit on THC content of 3% - while this is higher than in many other countries, it is lower than the naturally occurring 4-5% THC content of the cannabis plants that grow naturally in the state.
The government of neighboring Uttar Pradesh also added the potential for a hemp cultivation industry in October 2018, when the state cabinet confirmed the creation of a licensing system. There has not been much business investment in that area, however, as regulations remain nebulous, difficult to navigate, and strict to the point of cutting off profits. The country's second largest state, Madya Pradesh, recently adopted a new policy to allow cultivation of hemp for medical and industrial purposes. Farmers must be granted a license by the state to grow hemp, and may only sell their products to the state. While the state has over 75 million inhabitants, it has one of the lowest per capita GDPs in the country, and the region is reliant on farming.
India's local state governments have chosen to legalize hemp for many of the same reasons lawmakers in the United States did so in 2018: as an economic buoy for struggling farmers. However, while political leaders stick to speaking about the plant's uses as an "industrial material", the market potential for CBD far surpasses the market potential for hemp's industrial purposes.
India is also coming around to updating some of its strict anti-cannabis laws. While cultivation of the plant remains outlawed, the country has issued a few cultivation licenses for the purposes of medical research.
The country has a unique relationship with cannabis, as the plant grows wild in much of the country and has a long history as a medicinal treatment. India's Ministry of Ayurveda, Yoga and Naturopathy (AYUSH) has even secured some exemptions for the use of both hemp plants and cannabis plants in certain practices of faith and spirituality. The country's federal court will hear a petition challenging the NDPS for its ban on cannabis products in February 2020. Although it is unlikely to succeed, this case and others like it are evidence of the growing trend towards destigmatization of cannabis in India.