India’s FTA Decade: An era of Export Ambition

With 15 FTAs operational and nine FTAs under negotiations, India is becoming key player of global trade

By Dr Charu Grover Sharma, Assistant Professor, Indian Institute of Foreign Trade, New Delhi

India’s trade policy has seen a significant shift over the last five years. The government has signed free trade agreements (FTAs) with the UAE, Australia, the United Kingdom, four EFTA nations, Oman, New Zealand, and the European Union. The European Union agreement is a major milestone, which was signed after about two decades of negotiations. India has 15 FTAs in operation covering 27 countries, which account for more than 75% of India’s total trade. The nine recently signed FTAs will be fully operational within next ten months and three to four agreements are under negotiation. Since economic liberalisation, India has never seen such a trade integration.

The speed of India’s FTA post-2022 is great, but the success cannot be measured by speed alone. India has missed several decades of preferential market access while China succeeded in global supply chains using its own bilateral and regional agreements. The success of India will be measured by whether it can convert these agreements into actual export volume and that depends on domestic logistics, MSME capability, and regulatory efficiency.

The early numbers from India’s recent FTAs is promising. The India-UAE CEPA came in force in May 2022 — has eliminated duties on Indian goods such as textiles, gems and jewellery, engineering goods, and pharmaceuticals. Indian merchandise exports to the UAE grew by more than 20%, from $28.4 billion in 2021-22 to $37.36 billion in 2024-25 (Trade Intelligence and Analytics Portal, Ministry of Commerce). The India-Australia ECTA came in force in December 2022 granted duty free access on 100% tariff lines for Indian exporters. India exports to Australia increased by more than 80%, from $4 billion in 2021-22 to $7.3 billion in 2025-26 (Trade Intelligence and Analytics Portal, Ministry of Commerce). Sectors such as textiles, leather, machinery, and processed food, will benefit from the agreement — the sectors where India shows export competitiveness. The India-EU FTA, once ratified, will be the largest trade agreement India has ever entered. The EU is India’s second-largest trading partner. Preferential access to 27 European markets for Indian pharmaceuticals, IT services, textiles, chemicals, and agri-processed goods will lead to improvement in India’s export position that will compound over years. Table 1 gives the list of India’s key FTAs since 2010 – its status and export share.

Table1: India’s Key FTAs: Status and Export Share

Note: Total of India’s merchandise exports for 2025-26 = $441.7 billion

Source: Trade Intelligence and Analytics Portal, Department of Commerce

Trade deficits in context

Critics state that trade agreements are not working as it leads to increase in trade deficits with FTA partners. The data requires a more careful reading. Though India has shown a trade deficit with ASEAN, Japan, and South Korea of an annual average of $62 billion over the last three years. But a major share of these imports were industrial inputs such as semiconductors, electronic components, capital equipment, and speciality chemicals, which are used into production. The question is whether the value-added in final goods exceeds the cost of inputs. India’s merchandise exports have increased by 40.6% from 2021-22 to 2025-26, rising from $314 billion in 2021-22 to $441.7 billion in 2025-26, suggesting that production side is starting to show results. But for India to avoid the trap of being primarily an assembler rather than a manufacturer, investments in domestic component ecosystems — especially semiconductors and precision engineering — must follow. The total merchandise and service exports together reached $860 billion in 2025-26 (Department of Commerce). The government will be able to achieve its target laid down in Foreign Trade Policy 2023 of $1 trillion in merchandise exports by 2030 through signing these FTAs.

The composition of export growth matters as much as its volume. The major manufacturing power such as China, Germany, South Korea, who are at their export peaks have not avoided input-side deficits. But those economies built deep domestic capability in components, intermediate goods, and capital equipment, ensuring that value addition was driven at home. India must follow the same. India needs to move up in the manufacturing value chain than just assembling imported components. Sustained investment in domestic semiconductor fabrication, precision engineering, and advanced chemicals is required for FTA driven export growth into industrial development.

Utilisation Gaps and Inverted Duty Structure Problem

FTA utilisation among Indian exporters is below its potential. In this context, the Trade Connect ePlatform is setup to help exporters identify FTAs benefits. Further, MSME outreach programmes should reach smaller exporters to get benefits of preferential trade.

India has issues of inverted duty structure in several sectors. Raw materials such as steel and aluminium attract most favoured nation duties of 7.5–10% when imported. But finished goods manufactured from these inputs- machinery, industrial equipment, engineering products — can enter India at zero or low duty from ASEAN, Japan, South Korea, the UAE, and Australia under FTA terms. The focus should be given on sectors where raw material import costs are higher than to duties on finished products. These corrective measures are need to ensure that FTAs provide benefits for domestic manufacturers, not just for importers. Beyond the economics, India’s FTA agreements are essential to deepen ties with its partners – the EU, UK, UAE, and Australia in defence, technology, and geopolitical terms. The India-EU FTA in particular marks India’s arrival as a negotiating equal in the most complex and standards-intensive trade framework in the world.

“The FTA push has changed India’s position in global trade negotiations. Deficits with some partners remain wide, utilisation rates need improvement, and structural issues around inverted duties are not yet resolved. But the direction is right, and the pace has been unprecedented. What India does with these agreements matters as much as the agreements themselves.”

Author:

Dr. Charu Grover Sharma is an Assistant Professor, Indian Institute of Foreign Trade, Delhi.