India’s Trade Agreements

Syllabus: GS2/IR/GS3/Economy

Context

• India’s FTA journey is moving from expanding its network of agreements to making fuller use of the market access.

What is a Free Trade Agreement (FTA)?

• A Free Trade Agreement (FTA) is a pact between two or more countries where they agree to:
  • Reduce or eliminate customs duties on goods;
  • Liberalise trade in services;
  • Provide investment protection;
  • Ensure safeguards for intellectual property rights (IPR).

Major Highlights of India’s Recent FTAs

• In FY 2025-26, combined merchandise and services exports reached a record US$ 863.1 billion, including merchandise exports of US$ 441.8 billion.
  • UAE and Australia illustrate the early progress under India’s recent trade agreements.
• India-UAE CEPA (2022): India exported merchandise worth US$ 37,359.11 million to the UAE in FY 2025-26.
  • Among India’s trade agreements, the UAE was India’s largest export destination.
  • Bilateral trade crossed US$ 100.06 billion in FY 2024-25, recording a 19.6% growth.
  • India and the UAE set a new target of doubling trade to US$ 200 billion by 2032.
• India-Australia ECTA (2022): Total bilateral trade reached US$ 24.1 billion in FY 2024-25.  India’s exports to Australia have increased from US$ 4 billion in FY 2020-21 to US$ 7.28 billion in FY 2025-26, recording 80%+ growth.
  • From 2026 onwards, all Indian exports are now eligible for zero-duty access to the Australian market.

Significance of FTAs

• Facilitating Exporters’ Access to FTA Benefits: A trade agreement opens preferential market access, exporters generally need to provide proof of origin for their goods.
  • A preferential Certificate of Origin (CoO) confirms that the goods meet the prescribed rules of origin. This allows qualifying goods to receive reduced or zero customs duties.
• A Wider Range of Products Reaching FTA Markets: The reach of an FTA is also reflected in the range of products entering partner markets. This product-level expansion is visible across several of India’s recent agreements.
• Market Access: These agreements expand market access across several labour-intensive sectors.
  • Wider opportunities in these sectors enable smaller producers and local enterprises to participate more actively in international trade.
• Gains in Service Sector: India’s recent FTAs have expanded opportunities for service providers and professionals.
  • Services account for nearly 30% of India’s employment and services exports stood at US$ 421.3 billion in FY 2025-26. Given its scale, the sector forms an important part of India’s FTAs.

Way Ahead

• As recent agreements enter a deeper phase of implementation, India is also widening its future trade agenda. 
  • Around ten trade agreements are under discussion including new negotiations with the Eurasian Economic Union, Peru, Chile, Israel, Canada and Maldives. 
  • Further, existing agreements such as the India-Korea CEPA and India-Sri Lanka ETCA are being upgraded.  
• As businesses make greater use of the access secured under these agreements, their impact will extend.
  • This will widen export participation, diversify trade and strengthen commercial relationships with partner markets.

Source: PIB