You may or may not have liked Ramgopal Verma’s popular film Sarkar (modelled on The Godfather, released in 2005, with two more sequels following), where Amitabh Bachchan played the central character, which was inspired by Shiv Sena supremo, the late Bala Saheb Thackeray. The movie had clearly stood out for some of the dialogues with profound philosophical assumptions, with Bachchan’s baritone adding more magic to their impact. One such dialogue was: nazdeek ka fayda dekhne se pehle door ka nuksaan samjhna zaroori hai (do not turn a blind eye to possible long-term losses just for immediate gains). Think about it and you may find the toss-up between these two prospects is a consistent process that happens in all spheres of life. India’s foreign trade scenario may also be facing the same situation today. At least, that is what a recent report of a well-known international trade think tank (the Delhi-based Global Trade Research Initiative or GTRI) points out with statistical evidence.
The primary argument of the report underlines that the country does not seem to have learnt the lessons from the past FTAs, wherein it conceded more ground to the partner country and benefited them more. Plus, the new FTAs, which are being worked upon, also has in-built irritants, which will eventually play out for India in an adverse manner. For instance, they can act counter to the drive to boost domestic production and some of them (involving developed economies) will also make production standards in India quite stringent on products to be exported to them. But there is also a strong counterargument – by showing preference for FTAs, is India not taking proactive steps to safeguard its long-term international trade interests, when the influence of the WTO is on the wane?
Getting future-ready
The new FTAs have fructified, especially with big economies like the US, the EU and the UK being presented by the government as major achievements of a country on the way to becoming a major power. “Today, the world is opening doors for India,” Prime Minister Modi had recently commented. “Earlier, not even a window was opened. We should take full advantage of the free trade agreements that India has signed with around 40 countries.”
Analysts and industry stakeholders believe India got into an overdrive on bilateral agreements after it walked out of the China-dominated Regional Comprehensive Economic Partnership (RCEP). “India withdrew from the RCEP in October 2019 because it feared that a large, tariff-cutting arrangement involving 15 countries would lead to a surge in imports, particularly from China, widening India’s already substantial trade deficits and putting pressure on domestic manufacturing,” says Ajay Srivastava, founder, GTRI & a former Indian Trade Service officer, with experience in trade policy making, WTO and FTA negotiations. “New Delhi was also concerned about inadequate safeguards against import surges, weak rules of origin that could allow Chinese goods to enter through third countries and limited gains for India’s services exports”.
Since then, India has shifted towards a more selective trade strategy, based on bilateral and smaller regional FTAs, where it can negotiate country-specific concessions, he adds. In essence, India now prefers trade agreements it can tailor to its economic interests, rather than joining broad, one-size-fits-all mega-regional arrangements, where it has less control over outcomes. “China is the leading trade partner of India and it has an upper hand in the bilateral trade,” admits a senior official of a leading industry association. “India felt that being on the board of RECP would validate a swift inflow of more goods from China. But India was also gaining easy and zero-duty access to over a dozen happening markets for its goods. So, there were bright spots too in the deal”.
Nevertheless, India’s nod to FTAs has been backed by intense action in striking these deals, placing it among the front row of countries redrawing their strategies for future foreign trade. According to a recent government note, India has steadily expanded its network of free trade agreements over the past few years, reaching nine FTAs spanning 38 countries – starting with the India-Mauritius agreement in 2021, followed by the India-UAE Comprehensive Economic Partnership Agreement in May 2022. The India-Australia Economic & Trade Agreement came in December 2022, after which India inked the EFTA TEPA on 10 March 2024. The India-UK CETA was finalised in July 2025 and, five months later, the India-Oman CEPA deal reached the conclusive stage. The same month saw the announcement of the India-New Zealand FTA, followed by the India-EU FTA around January end. And barely within a short span of a few weeks, the much-awaited framework for an interim agreement with the US was signed on 7 February 2026.
The government functionaries have been pointing at the benefits of these FTAs for different sections of the Indian economy vis-à-vis market access – not just big manufacturers and corporate houses with definitive international linkage for their size and scale, but even small entrepreneurs, farmers, MSMEs exporting garments, leather and handicrafts, students, IT professionals, chefs, yoga instructors, etc. That India is negotiating these deals from a position of strength has been a key argument from the government side. Piyush Goyal, minister for commerce, spearheading the FTA drive, has often remarked that ‘India’s engagement with developed economies is based on complementarity, rather than competition’. Referring to FTAs with developed countries, he has always pointed out their demographic challenges and rising production costs and maintained that India can gain big time from these gaps, backed up by its youthful talent, competitive costs and now also technological know-how.
Pointing at bottlenecks
That the FTAs which were signed and implemented in the past decades have not been fruitful for India is common knowledge. GTRI’s new report (FTA Report Card, 2026), which carries the emphatic punchline: Challenges India can no longer ignore, has put an abundance of statistics in support of its key argument. For instance, during 2007-09 (before the FTAs took effect) and 2023-25, India’s trade deficit with ASEAN grew by 381 per cent, with Japan by 318 per cent, and with South Korea by 268 per cent. In comparison, India’s trade deficit with the rest of the world went up by 142 per cent. Over the past three years, India’s average annual trade deficit with ASEAN, Japan and South Korea has reached about $62 billion. India has 15 FTAs in force now and nine more FTAs under negotiation – potentially covering 69 countries and over 75 per cent of its exports. And the existing FTAs account for 28.5 per cent of India’s exports and 32.2 per cent of its imports.
Many pointers in the report underline the inherent weaknesses of the FTA frameworks, which could create more problems in the future. For instance, most FTA partners already had low tariffs before the agreements, which limits actual export gains for Indian firms. Just 20-30 per cent of India’s eligible exports are utilising FTA benefits, compared with 60-70 per cent utilisation by exporters to India from the countries with a bilateral agreement. High compliance costs and low foreign tariffs are discouraging Indian exporters from using FTA preferences. Furthermore, FTAs have worsened India’s inverted duty structure by making finished imports cheaper. Also, new-generation FTAs increasingly influence domestic policies on labour, environment, digital trade, procurement and data governance. The EU’s Carbon Border Adjustment Mechanism (CBAM) could erode many of the tariff benefits India could secure under an FTA. The report concludes that competitiveness – not tariff preferences alone – ultimately determines whether FTAs would benefit India’s economy.
The report particularly points at how exporters from FTA partners are generally drawing more advantage since most of them are open economies with low tariffs (average MFN tariffs are close to zero in Singapore and below 4 per cent in Japan, Australia, Malaysia and the UAE). “An equally critical issue from the future perspective is what these deals can adversely do to domestic production. When it becomes cheaper to manufacture in an ASEAN country and export duty-free to India than to produce in India, investment and jobs tend to move abroad. As a result, FTAs can encourage firms to ‘Make in ASEAN; Sell in India’ rather than ‘Make in India’,” Srivastava remarks.
And, then, the new-age FTAs are going beyond tariffs and market access centricity and also provisioning for change or modification in rules via-a-vis labour, environment, digital trade, intellectual property rights (IPR), government procurement, competition policy, anti-corruption, gender, MSMEs and data governance. In a future date, they are expected to create more complexities for Indian suppliers to the world.
Stakeholders’ opinion
The possible futuristic irritants notwithstanding, the stakeholders in the value chain meanwhile, are looking at benefits that have started becoming visible. “From the perspective of the express industry, which is particularly involved in the transition of valued goods, such initiatives mean enhancement of trade volume on both sides – and this is a positive move for us,” underlines Vijay Kumar, CEO, Express Industry Council of India. “FTAs have their own advantages and disadvantages. We all want better market access but this is also a function of how we perform. I wouldn’t say that some of the FTAs signed recently are not taking care of India’s interests,” remarks Pankaj Chadha, chairman, Engineering Exports Promotion Council (EEPC) while referring to the India-UK deal. Among other things, it provides for the entry of India-made electric and hybrid passenger cars – from the sixth year onwards, under different price brackets and with a specified quota.
The deal has particularly enthused Indian OEMs. To become effective from the middle of the next month, it is expected to open a market of the size of $500 billion for Indian exporters with 99 per cent of their produce getting duty free access. The sectors likely to benefit the most are: textile, apparels, footwear, engineering goods and professional services. In return, India has offered lower or zero duty on 90 per cent of product line for the UK exporters. Liquor, cosmetics and luxury cars are three segments slated to benefit the UK producers in the near-to-long term.
Among the new age FTAs (signed after 2020), the deal with the UAE is cited particularly as an example of trade enhancement that such agreements can bring. Signed in February 2022, it has helped more than double the bilateral trade volume in just four years, with India’s labour-intensive sectors like textiles and engineering goods making major gains. “The deal has suddenly aided in improving our supplies to that region,” Chadha acknowledges. “The UAE is actually a trade outlet from where our goods are going to other regions, especially countries in North Africa. This deal has certainly further pushed our business”.
It’s not only India that is betting big on FTAs to improve its international trade. Countries and blocs like the EU, the UK, Australia, Canada, Singapore, South Korea and even China (which avoids such deals with bigger economies) have been quite proactive on this front in the past decade. “At a time when WTO’s influence is shrinking, this is the best route to push your exim trade,” Chadha argues. It is no secret to anyone that the hegemonic tussle between the US and China and the former deriding FTA’s importance, the organisation has become considerably weak. “WTO becoming weak and, therefore, FTAs becoming strategically more important is not a valid argument.
About 80 per cent of the global trade is still guided by the WTO-made rules,” Srivastava counters. “And nobody is diluting the potential of the FTAs. But we have to be careful that they really bring benefits to the domestic constituents on a sustainable basis. The approach has to be more balanced,” he further emphasises. This can hardly be bracketed as exaggerated apprehension, considering the outcomes in the past.