India is accelerating free trade negotiations at a time of growing global protectionism and mounting tariff pressures, especially from the United States. While the country has signed multiple FTAs over the years, experience shows that agreements alone do not guarantee export success. The real challenge lies in how these pacts are designed, implemented and supported at home.
India’s expanding FTA landscape
According to the World Trade Organization, India has entered into 20 regional or free trade agreements. This count does not include the most recent pacts with the United Kingdom and the European Free Trade Association (EFTA), which have added further momentum to India’s trade diplomacy.
Negotiations are currently underway with major partners such as the United States, the European Union, Canada and the Southern African Customs Union. These efforts have gained urgency as India faces American tariffs of up to 50 per cent on certain key exports. Against this backdrop, there have also been speculative discussions on re-engaging with the Regional Comprehensive Economic Partnership (RCEP), which India exited in 2019 due to concerns over agriculture and weak rules of origin. Officially, however, India has not moved beyond limited consultations.
Why trade diversification needs more than FTAs
Trade diversification cannot be achieved merely by signing agreements. It requires a deeper transformation of India’s productive capacity and closer integration with global value chains. Without this, preferential market access often benefits trading partners more than domestic producers.
Commerce Ministry data reveal that several of India’s earlier FTAs have coincided with widening trade deficits. The agreement with ASEAN is a striking example: India’s trade deficit with the bloc expanded from around $10 billion in 2017 to nearly $44 billion by 2023. Similar trends are visible in trade with Japan, where imports of high-value, capital-intensive goods have grown faster than India’s exports, despite rising outward shipments.
Structural flaws in India’s earlier FTAs
The reasons for these outcomes are largely structural and policy-driven. While tariffs were reduced, many agreements did not adequately address non-tariff barriers. Key gaps included the absence of strong mutual recognition arrangements for standards, certifications and testing requirements.
Additionally, several FTAs were not tailored to India’s specific sectoral strengths. Consultations with industry bodies were often limited, leaving exporters ill-prepared to use preferential provisions. Domestic outreach was also weak, resulting in low awareness among small and medium exporters, even as partner countries exploited tariff advantages more effectively.
Signs of course correction in recent agreements
Recognising these shortcomings, the government has reviewed FTAs with ASEAN, Japan and South Korea. This learning appears to have shaped newer agreements, most notably the India–UAE Comprehensive Economic Partnership Agreement.
Under this pact, outcomes have been more balanced, with non-oil bilateral trade reaching around $100 billion in FY25, according to DGFT data. The agreement placed greater emphasis on services, investment facilitation and regulatory cooperation, beyond simple tariff cuts.
Negotiating priorities with the U.S. and the EU
As India intensifies talks with the United States, negotiations must be anchored in detailed sectoral consultations. Exporters in services, seafood, engineering goods and textiles have distinct market access and regulatory concerns that should shape India’s negotiating positions.
With the European Union, climate-linked trade barriers demand special attention. Carbon-intensive sectors such as iron and steel and cement face new challenges under the EU’s Carbon Border Adjustment Mechanism. Without safeguards, Indian exporters risk losing competitiveness even after tariff concessions.
Beyond agreements: Supporting exporters at home
A free trade agreement is only the starting point. Its success depends on what follows — strengthening standards infrastructure, upgrading logistics, enabling access to technology, and providing timely market intelligence. Exporters must be supported to meet stringent quality, sustainability and certification requirements in advanced markets.
Without these complementary measures, FTAs risk becoming asymmetrical arrangements that widen deficits rather than promote growth.
What to note for Prelims?
- India has signed 20 FTAs as per WTO data; recent additions include UK and EFTA
- India exited RCEP in 2019 over agriculture and rules of origin concerns
- ASEAN trade deficit widened sharply between 2017 and 2023
- India–UAE CEPA cited as a more balanced FTA model
- EU’s Carbon Border Adjustment Mechanism affects carbon-intensive exports
What to note for Mains?
- Limitations of India’s early FTAs and reasons for widening trade deficits
- Role of non-tariff barriers and standards in shaping trade outcomes
- Importance of sector-specific negotiation strategies
- FTAs versus integration into global value chains
- Need for domestic capacity-building to realise gains from trade agreements
