India Secures Preferential Access to Two-Thirds of Global Trade Through FTAs

Syllabus: GS3/ Economy

Context

• The Union Minister of Commerce and Industry said that India now enjoys preferential trade access to nearly two-thirds of global trade through a series of free trade agreements.

Free Trade Agreement (FTA)

• FTAs are arrangements between two or more countries or trading blocs that primarily agree to reduce or eliminate customs tariff and non tariff barriers on substantial trade between them.
  • They can cover both goods and services. It also addresses issues such as investment, mobility of professionals, and regulatory cooperation.
• India uses different terms to denote the scope and depth of trade agreements.
  • CECA/CEPA (Comprehensive Economic Cooperation/Partnership Agreement): Covers goods, services, investment, intellectual property, and regulatory issues.
  • ECTA (Economic Cooperation & Trade Agreement)
  • TEPA (Trade & Economic Partnership Agreement)
  • CETA (Comprehensive Economic and Trade Agreement)
• India has secured preferential tariff access to markets covering roughly 70% of global GDP and trade flows. India now has trade arrangements with 38 high-income economies, many complementary to its export strengths.

Major FTAs signed in recent years

• India–UAE CEPA ( 2022): The pact opened 99% of tariff lines (zero-duty on nearly all consumer and industrial exports) and expanded services and manpower mobility.
• India–Australia ECTA ( 2022): The deal eliminates tariffs on all Australian exports to India and on the entire range of Indian exports.
• India–EFTA TEPA (2024): The Trade and Economic Partnership Agreement (TEPA) with the four EFTA countries (Switzerland, Norway, Iceland, Liechtenstein) was signed in 2024 and enters force in 2025.
• India–UK CETA (2025): It grants duty-free access to nearly 99% of India’s exports to Britain.
• India–Oman CEPA ( 2025): Oman offered zero-duty on 98.08% of its tariff lines, covering 99.38% of India’s exports to Oman.
• Índia–EU FTA (2026): Under the pact, 97% of EU tariff lines will be covered (about 99.5% of trade value), with India eliminating tariffs on 70.4% of tariff lines at entry.
  • The EU agreement alone covers markets responsible for about one-third of global trade.

ftas under negotiation

• Gulf Cooperation Council (GCC): Negotiations formally launched in February 2026 with the Gulf Cooperation Council. The bloc includes Saudi Arabia, UAE, Oman, Qatar, Kuwait, and Bahrain.
• Israel: India and Israel have initiated FTA negotiations, with the first round already held.
• Chile: Terms of Reference signed in 2025 to launch negotiations with Chile.
• Canada: Negotiations with Canada have been revived after earlier disruptions.

Significance of India’s Expanding FTA Network

• Accelerated Export Growth: FTAs reduce or eliminate import duties in partner countries, making Indian goods more price-competitive.
• Integration into Global Value Chains (GVCs): FTAs facilitate participation in cross-border production networks by lowering input costs and simplifying trade rules.
  • Indian firms can import intermediate goods at lower tariffs and export finished products competitively.
• Gains Labour-Intensive Sectors: Micro, Small and Medium Enterprises (MSMEs) account for a large share of India’s exports.
  • FTAs open new markets for products like handicrafts, textiles, leather goods, processed food, and light engineering items.
• Attraction of Foreign Direct Investment (FDI): FTAs improve investor confidence by ensuring stable market access and predictable trade rules.
  • Companies invest in India to use it as an export base to partner countries, facilitating technology transfer, skill development, and capital inflows.

Concerns with FTAs

• Risk of Trade Imbalances: Past FTAs have, in some cases, led to imports rising faster than exports, widening the trade deficit.
  • For instance, India’s trade deficit with ASEAN expanded significantly after tariff reductions under the 2010 Goods Agreement.
• Competitive Pressure on Domestic Industries: Domestic industries often fear being outcompeted by cheaper or technologically superior foreign goods.
  • Sectors such as dairy, agriculture, automobiles, steel, and electronics are particularly sensitive in FTA negotiations.

Way Ahead

• India’s expanding FTA network marks a decisive shift toward deeper global economic integration. By securing preferential access to markets, India is positioning itself as a major export hub and supply-chain partner. 
• If complemented by domestic reforms and industry preparedness, these agreements can significantly advance India’s goal of becoming a leading global trading power and achieving a trillion-dollar export economy.

Source: DD News