India’s billion-dollar trade juggernaut has an unwanted case of missing balance
Roughly fifteen years after India signed its major free trade agreements with the ASEAN bloc, South Korea, and Japan, trade data shows a persistently and increasingly one-sided pattern, with imports from FTA partners rising faster than exports to them.
India's deficit under the ASEAN-India Trade in Goods Agreement and its trade with Japan and South Korea under their respective agreements has widened, even as overall bilateral trade volumes have grown.
Trade researchers attribute the imbalance to a mix of tariff asymmetries, non-tariff barriers on the partner side, low utilisation of preferential tariff schedules by Indian exporters, and costly domestic inputs that limit Indian manufacturing competitiveness.
Rather than exiting or renegotiating from scratch, officials and trade experts have called for repairing the agreements through structured reviews addressing rules of origin, market access, and trade facilitation.
ASEAN-India Trade in Goods Agreement (AITIGA) and Its Ongoing Review
The ASEAN-India Trade in Goods Agreement, effective from 1 January 2010, eliminated or reduced tariffs on a large share of goods traded between India and the ten ASEAN member states, later supplemented by the ASEAN-India Agreement on Services and Investment (effective 1 July 2015). Concerns over a widening deficit and alleged circumvention of rules of origin by third-country goods routed through ASEAN members led both sides to launch a formal review of the agreement.
Key Details
- AITIGA (goods) came into force 1 January 2010; the companion Services and Investment Agreement came into force 1 July 2015, together now referred to as the India-ASEAN Comprehensive Economic Cooperation Agreement (IACECA).
- The AITIGA review process, underway through Joint Committee meetings (the most recent rounds held in 2026), focuses on customs procedures, trade facilitation, market access, and tightening rules of origin to prevent non-ASEAN goods (particularly from China) from entering India duty-free via re-labelling in ASEAN countries.
- Bilateral trade between India and ASEAN reached around $128 billion in FY2025-26, with India's deficit under the goods agreement having grown substantially since the pact's early years.
The review process now underway is the direct institutional response to the deficit pattern highlighted in the news event, and the "repair, don't shut the road" framing reflects the Commerce Ministry's stated approach of renegotiating specific provisions rather than withdrawing from AITIGA.
India-Korea CEPA and India-Japan CEPA: Structure and Asymmetry
India's Comprehensive Economic Partnership Agreements (CEPAs) with South Korea and Japan cover goods, services, investment, and other areas such as government procurement and intellectual property, going beyond a goods-only FTA. Both agreements followed an asymmetric tariff liberalisation schedule, in part reflecting India's status as a developing economy negotiating with advanced manufacturing exporters.
Key Details
- India-Korea CEPA was signed on 7 August 2009 and came into force on 1 January 2010; India-Japan CEPA was signed on 16 February 2011 and came into force on 1 August 2011.
- India's trade deficit under the Korea CEPA reached roughly $15.2 billion in FY2024-25, with Indian exports to Korea having declined even as imports continued to grow; the deficit under the Japan CEPA stood at approximately $10.7 billion in FY2025-26 (through November 2025).
- Both agreements are subject to periodic joint review mechanisms; India has sought faster tariff elimination on politically sensitive imports and improved market access for goods like pharmaceuticals, textiles, and processed foods in return.
These two CEPAs illustrate that the "unwanted case of missing balance" is not unique to the ASEAN pact; the same asymmetric liberalisation pattern, once intended to give India tariff headroom as the less industrially developed partner, has instead translated into growing, structural deficits across all three major East/Southeast Asian agreements.
Rules of Origin and FTA Utilisation Rate
Rules of origin (RoO) are the criteria used to determine a good's "economic nationality" for the purpose of claiming preferential (lower or zero) tariff treatment under an FTA; without sufficient local value addition or processing in the exporting FTA-partner country, a good does not qualify for the preferential rate. The "FTA utilisation rate" measures what share of trade eligible for preferential tariffs under an agreement actually claims that preference, using the correct certificate of origin.
Key Details
- India's utilisation rate of its own FTA preferences by domestic exporters has historically remained lower than the rate at which partner-country exporters use the same preferences to access the Indian market, partly due to compliance costs, paperwork, and limited exporter awareness.
- The Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 (CAROTAR) were introduced to tighten origin verification at the Indian end and curb misuse of RoO by non-originating (largely Chinese-origin) goods routed through FTA partner countries.
- Trade economists point to high input costs, including tariffs on intermediate raw materials used by Indian manufacturers, as a further reason Indian goods struggle to compete on price even where preferential access exists.
Weak utilisation of India's own FTA preferences by domestic exporters, combined with RoO leakage benefiting third-country goods entering via FTA partners, together form the "poor FTA utilisation and costly inputs" root causes cited for the widening trade imbalance, independent of the tariff schedules themselves.
- AITIGA (goods) in force since 1 January 2010; India-Korea CEPA in force since 1 January 2010; India-Japan CEPA in force since 1 August 2011.
- India-ASEAN bilateral trade reached approximately $128 billion in FY2025-26.
- India's deficit under the Korea CEPA was about $15.2 billion in FY2024-25; under the Japan CEPA about $10.7 billion in FY2025-26 (through November 2025).
- CAROTAR, 2020 tightened rules-of-origin verification to curb third-country goods entering India duty-free via FTA partner routing.
- India and ASEAN have held multiple AITIGA Joint Committee review rounds through 2026 to address tariff asymmetries and non-tariff barriers.