New Delhi: Through signing as many as nine Free Trade Agreements (FTAs) in the last decade with some of the world’s leading economies, India has been able to increase its share of global trade. Some of the FTAs are specifically designed to give a boost to Indian exports and open up markets for Indian manufacturers. However, a recent report by the Global Trade Research Initiative has revealed an astounding fact—most Indian exporters were not deriving optimum benefits from the FTAs.
India’s primary current FTAs refer to 15 completed FTAs associating 27 nations, whereas negotiations and implementation stages are at various stages of other much-awaited FTAs. Once the past deals are signed and implemented, India’s FTA network may cover almost 69 nations, which is over 75% of India’s trading destinations. Nonetheless, FTA preferences are as low as 20-30% of eligible Indian exports in these countries, compared to partner country utilization of 60-70%.
Why Are Indian Exporters Missing Out?
According to the GTRI report, there are various reasons that explain why Indian firms do not make extensive use of FTAs. Firstly, it is difficult to meet the rules of origin. This criterion is used to establish the origin of a good, according to provisions of a trade agreement.
Small and medium companies, potentially losing cheaper tariffs through the FTA, are not encouraged to take full advantage of the FTA by making the claim. They would rather prefer to export under the normal table tariff because the paperwork is too burdensome and costly. The tariff saving could be marginal in most cases.
Market intelligence is also considered the major factor, which is the lack of known status amongst the exporters. Some existing firms are not even aware of the benefit they can avail under FTAs/agreements or do not have the skill and knowledge of handling tariff & trade-related rules and regulations.
Growing Trade Deficits Raise Concerns
The report also mentions that the trading partners of FTA signatory countries have seen increased trade deficits with India, with the trade deficit with the four FTA partner countries in 2007-09 to 2023-25 rising sharply. India’s trade deficit with ASEAN countries increased by 381% from 2007-09 to 2023-25 and with Japan and South Korea by 318% and 268%, respectively.
Although the FTAs are meant to promote bilateral trade, it seems that the benefits have not been equitably shared. Imports from partner nations have experienced a high growth rate, while Indian exports have been unable to match a similar growth rate.
This disparity has led to fear among observers and policymakers and the various concerned parties about whether the free trade agreement with India is achievable.
Manufacturing Sector Faces Additional Pressure
The GTRI report goes further to suggest that a number of FTAs have deepened or are deepening what is India’s inverted duty structure. This situation occurs when imports of finished goods can undercut local manufacturing due to the benefit of lower tariffs.
These factors could get businesses motivated to import goods from international sources as opposed to making it in India and result in the stagnation of Indian manufacturing. It is suggested that some sectors could even do that by shifting certain stages of their production to the other nations where the trade conditions are better.
This may be a disaster for a country that is promoting the initiative “Make in India” vigorously and making efforts to establish a robust manufacturing environment.
India’s Ambitious Export Goals
However, India continues to display confidence in using FTAs for future growth. Minister for Commerce and Industry Mr. Piyush Goyal has been reiterating the fact that utilization of trade agreements is essential for increasing exports, providing employment opportunities, and increasing our competitiveness.
India has recently benchmarked exports at a historic high of Rs. 863 billion in FY 2025-26 and aims to touch the US$1 trillion mark in FY 2026-27. FTAs are likely to enable India to realize this goal through preferential access to large economies.
Furthermore, there have been the successful negotiations or completion of many significant trade agreements (with the UK, Oman, New Zealand, and the EU) that are anticipated to be beneficial for Indian exporters from the manufacturing, pharmaceuticals, services, textiles, and agriculture sectors.
The Need for Better FTA Utilization
According to the experts, merely signing trade agreements is not sufficient. The key is to make sure that businesses are able to utilize them properly.
To enhance utilization, the line ministries and industry associations recommend increased awareness campaigns, more streamlined documentation processes, introduction of electronic certification systems, and specific assistance to small exporters. Training on trade compliance and rules of origin may assist firms in realizing the full benefits of FTAs.
Analysts argue that closing the ‘utilization gap’ and increasing the number of exporters’ participation to global levels will be the key to the possibly large boost in India’s export competitiveness and reduction in trade balances.
Conclusion
India’s growing network of free trade agreements is one of India’s most significant economic tools for global connectivity. The most recent GTRI report, however, emphasizes a crucial disconnect between policymaking and its real-world application. Although India has negotiated agreements with dozens of nations, many export firms have not been able to realize the benefits of such deals.
Achieving India’s import and export goals will require high levels of FTA awareness; barriers to duty-free trade must be reduced; and Indian exporters must be more engaged with and better supported in FTA utilization. Whether India meets its targets will be in large part how effective its firms are at making gains from their existing and future FTA commitments.
