{"id":80696,"date":"2026-08-04T18:10:15","date_gmt":"2026-08-04T12:40:15","guid":{"rendered":"https:\/\/www.nextias.com\/ca\/?p=80696"},"modified":"2026-08-04T18:12:11","modified_gmt":"2026-08-04T12:42:11","slug":"india-fta-strategy","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/editorial-analysis\/04-08-2026\/india-fta-strategy","title":{"rendered":"The Prob\u00adlem With India\u2019s Free Trade Agree\u00adment Strategy"},"content":{"rendered":"\n<p><strong>Syllabus: GS3\/Economy<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Context<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>India is expanding its Free Trade Agreement (FTA) network, but the experience with earlier FTAs has raised concerns over widening trade deficits and limited export competitiveness.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>What is a Free Trade Agreement (FTA)?<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>FTAs are arrangements between two or more countries or trading blocs that primarily agree to <strong>reduce or eliminate customs tariff and non tariff barriers<\/strong> on substantial trade between them.\n<ul class=\"wp-block-list\">\n<li>They can cover both goods and services.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>FTAs also address issues such as <strong>investment, mobility of professionals, and regulatory cooperation.<\/strong><\/li>\n<\/ul>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-large is-resized\"><img data-dominant-color=\"e2d8bb\" data-has-transparency=\"false\" loading=\"lazy\" decoding=\"async\" width=\"724\" height=\"1024\" src=\"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2026\/08\/image-19-724x1024.png\" alt=\"free trade agreement\" class=\"not-transparent wp-image-80697\" style=\"--dominant-color: #e2d8bb; aspect-ratio:0.707037568285165;width:368px;height:auto\" srcset=\"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2026\/08\/image-19-724x1024.png 724w, https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2026\/08\/image-19-212x300.png 212w, https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2026\/08\/image-19-768x1086.png 768w, https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2026\/08\/image-19.png 1086w\" sizes=\"auto, (max-width: 724px) 100vw, 724px\" \/><\/figure>\n<\/div>\n\n\n<h2 class=\"wp-block-heading\"><strong>India&#8217;s Free Trade Agreements (FTAs)<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Existing: <\/strong>India currently has <strong>16 operational FTAs covering 28 countries<\/strong>, including the recently implemented <strong>India\u2013UK Comprehensive Economic and Trade Agreement (CETA).<\/strong>\n<ul class=\"wp-block-list\">\n<li>Since <strong>2020<\/strong>, India has operationalised FTAs with the <strong>UAE, Australia, Mauritius, EFTA (Switzerland, Norway, Iceland and Liechtenstein), Oman, and the United Kingdom.<\/strong><\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>FTAs awaiting implementation or under negotiation:<\/strong> India has eight additional FTAs involving <strong>41 countries<\/strong> awaiting implementation or under negotiation.\n<ul class=\"wp-block-list\">\n<li><strong>The India\u2013New Zealand FTA<\/strong> has been signed and is awaiting implementation.<\/li>\n\n\n\n<li>India is also negotiating FTAs with the<strong> United States, Canada, Israel, Peru, the Gulf Cooperation Council (GCC),<\/strong> and the<strong> Eurasian Economic Union (EAEU).<\/strong><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Why is India Expanding its FTA Network?<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>India&#8217;s Export-led Growth:<\/strong> India aims to achieve<strong> US$2 trillion in exports by 2030, <\/strong>with FTAs serving as an important instrument for expanding merchandise and services exports.<\/li>\n\n\n\n<li><strong>Expand Market Access:<\/strong> FTAs provide Indian exporters with preferential access to overseas markets by reducing or eliminating tariffs and non-tariff barriers, thereby improving the competitiveness of Indian goods and services.<\/li>\n\n\n\n<li><strong>Attract Foreign Investment: <\/strong>Preferential trade agreements improve the investment climate by providing greater market certainty, encouraging <strong>foreign direct investment (FDI), technology transfer, and supply chain diversification.<\/strong><\/li>\n\n\n\n<li><strong>Economic and Strategic Partnerships: <\/strong>FTAs reinforce India&#8217;s trade diplomacy and strategic engagement with key economies, supporting initiatives such as <strong>Act East Policy, Neighbourhood First, and India-Middle East-Europe Economic Corridor (IMEC).<\/strong><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Challenges in India&#8217;s FTA Strategy<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Rising Trade Deficits:<\/strong> Between <strong>2007\u201309 and 2023\u201325,<\/strong> the trade deficit increased by <strong>381%<\/strong> with <strong>ASEAN, 318% with Japan,<\/strong> and <strong>268% with South Korea<\/strong>, compared to a 142% increase with the rest of the world.\n<ul class=\"wp-block-list\">\n<li><strong>In FY 2025<\/strong>, India recorded a trade deficit of over <strong>US$50 billion<\/strong> with the UAE, Australia, Mauritius, and EFTA countries.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Low Utilisation of FTA Benefits:<\/strong> Only <strong>20\u201330%<\/strong> of eligible Indian exports use FTA benefits, while import-side utilisation is estimated at <strong>60\u201370%.<\/strong>\n<ul class=\"wp-block-list\">\n<li>Compliance with<strong> Rules of Origin (RoO)<\/strong>, certification requirements, and documentation increases transaction costs.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Inverted Duty Structure:<\/strong> Higher import duties on raw materials and intermediate goods than on finished products increase production costs for Indian manufacturers.\n<ul class=\"wp-block-list\">\n<li>This weakens domestic manufacturing, reduces value addition, and undermines the objectives of the Make in India initiative.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Shift of Manufacturing to FTA Partner Countries: <\/strong>The existing tariff structure encourages firms to establish manufacturing units in FTA partner countries such as <strong>Vietnam, Thailand, and Indonesia<\/strong>, and export finished goods to India.\n<ul class=\"wp-block-list\">\n<li>This can reduce domestic investment, employment, and industrial capacity while weakening India&#8217;s manufacturing ecosystem.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Sustainability Measures: <\/strong>Developed countries are increasingly linking FTAs with labour, environmental, and climate-related standards, including the <strong>European Union&#8217;s Carbon Border Adjustment Mechanism (CBAM).<\/strong>\n<ul class=\"wp-block-list\">\n<li>Indian exporters may face additional compliance requirements related to carbon emissions, sustainability, and due diligence.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Way Ahead<\/strong><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Correct Inverted Duty Structure:<\/strong> Lower duties on raw materials and intermediate items to enhance the competitiveness of domestic producers.<\/li>\n\n\n\n<li><strong>Build National Competitiveness: <\/strong>Invest in manufacturing, technology, logistics and resilient supply chains as long-term FTA gains depend on strong productive capacities.<\/li>\n\n\n\n<li><strong>Creation of an FTA Impact Monitoring Authority: <\/strong>Set up a special organization to periodically monitor the utilisation of FTA, sector-wise outcomes, import surges, trade deficits and impact of regulatory commitments on policy space.<\/li>\n\n\n\n<li><strong>Tackle Non-Tariff Barriers:<\/strong> Emphasise mutual recognition of standards, testing and conformity assessment to promote market access for Indian exporters.<\/li>\n\n\n\n<li><strong>Strengthen FTA Negotiation Framework: <\/strong>It is important to introduce performance evaluation and accountability for trade negotiators to guarantee that future FTAs adequately protect India\u2019s economic and strategic interests.<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-background has-fixed-layout\" style=\"background-color:#fff2cc\"><tbody><tr><td><strong>Daily Mains Practice Question<\/strong><br><strong>[Q]<\/strong> India&#8217;s expanding Free Trade Agreement (FTA) network presents both opportunities and challenges. Critically examine the limitations of India&#8217;s FTA strategy and suggest reforms needed to ensure that FTAs contribute to sustainable economic growth.\u00a0<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p><strong>Source: <\/strong><a href=\"http:\/\/th\"><strong>TH<\/strong><\/a><\/p>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p><strong>Published on:<\/strong> 04 August, 2026<\/p>\n<p>India is expanding its Free Trade Agreement (FTA) network, but the experience with earlier FTAs has raised concerns over widening trade deficits and limited export competitiveness.<\/p>\n","protected":false},"author":15,"featured_media":80699,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[22],"tags":[],"class_list":["post-80696","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-editorial-analysis"],"acf":[],"jetpack_featured_media_url":"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2026\/08\/free-trade-agreement.webp","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/80696","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=80696"}],"version-history":[{"count":1,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/80696\/revisions"}],"predecessor-version":[{"id":80698,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/80696\/revisions\/80698"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media\/80699"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=80696"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=80696"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=80696"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}