India's FTA Strategy Shifts Focus to Effective Utilisation of Existing Agreements
India has signed over 18 comprehensive Free Trade Agreements, with six concluded in the past four years alone (UAE, Australia, EFTA, UK, Oman, and New Zealand).
The policy focus is now shifting from negotiating new FTAs to ensuring effective utilisation of existing agreements for actual export growth.
Current FTA utilisation rate remains low at 20-30%, with many exporters unaware of or unable to navigate complex rules of origin and documentation requirements.
India's imports from FTA partner nations grew 10% (to $65.3 billion) in H1 FY2026, while exports to the same partners contracted 9% (to $38.7 billion), raising concerns about widening trade deficits under FTAs.
Free Trade Agreements: Types and India's FTA Architecture
A Free Trade Agreement (FTA) is a pact between two or more nations to reduce barriers to imports and exports among them. India uses several types of trade agreements: Preferential Trade Agreements (PTAs) offering limited tariff concessions; Comprehensive Economic Partnership Agreements (CEPAs) covering goods, services, and investment; Economic Cooperation and Trade Agreements (ECTAs) focusing on goods with some services; and Trade and Economic Partnership Agreements (TEPAs) similar to CEPAs but with investment and sustainability chapters.
The sheer number of recently concluded FTAs has created an implementation challenge — India must now build the institutional capacity to help SMEs and exporters actually use these agreements.
Rules of Origin: The Key to FTA Utilisation
Rules of Origin (RoO) are criteria used to determine the national source of a product in international trade. Under FTAs, only goods that meet specified origin criteria qualify for preferential tariff rates. The complexity of RoO is the single biggest barrier to FTA utilisation in India, as small exporters often lack the documentation capability or understanding to claim preferences. RoO prevent trade deflection — where non-member countries route goods through FTA partners to exploit preferential tariffs.
The low FTA utilisation rate (20-30%) is primarily driven by complex RoO documentation requirements that deter small and medium exporters from claiming preferential tariffs.
Trade Deficit Concerns Under FTAs
India's historical experience with FTAs has been mixed, with several agreements leading to widening trade deficits rather than export growth. The India-ASEAN FTA (2010) and India-South Korea CEPA (2010) saw significant increases in imports without corresponding export gains. The Global Trade Research Initiative (GTRI) has highlighted that imports from FTA partners grew 10% to $65.3 billion in H1 FY2026, while exports fell 9% to $38.7 billion — a structural imbalance that undermines the purpose of trade agreements.
Key Details
- India-ASEAN FTA (2010): India's trade deficit with ASEAN widened from $5 billion (2010) to over $30 billion
- India withdrew from RCEP in November 2019 citing trade deficit concerns with China
- FTA utilisation rate: 20-30% in India vs 70-80% in ASEAN countries
- Key sectors with low utilisation: engineering, electronics, chemicals
- Sectors with better utilisation: gems & jewellery, textiles, pharmaceuticals
The shift from "signing FTAs" to "utilising FTAs" reflects hard-learned lessons from India's ASEAN experience and a more strategic approach to trade policy that focuses on actual export outcomes rather than diplomatic achievements.
- India has signed 18+ comprehensive FTAs as of early 2026
- Six FTAs signed in the last four years: UAE, Australia, EFTA, UK, Oman, New Zealand
- FTA utilisation rate: only 20-30% in India (vs 70-80% in ASEAN countries)
- H1 FY2026: imports from FTA partners $65.3 billion (+10%), exports $38.7 billion (-9%)
- India withdrew from RCEP: November 2019
- India-EFTA TEPA: $100 billion investment commitment over 15 years
- India-UK FTA: eliminates tariffs on 99% of Indian exports