India’s Trade Deals Mark a Turning Point
Introduction
In trade policy terms, 2026 may prove to be a landmark year for India. Within weeks, New Delhi finalized sweeping trade agreements with the European Union and the United States, deals described by officials as historic in scale. These pacts mark India’s 10th free trade agreement since 2014 and signal a decisive shift away from its earlier protectionist posture. Yet while the momentum is notable, experts caution that agreements alone will not guarantee sustained export growth without deeper structural reforms.
A Strategic Pivot in Trade Policy
The recent agreements underscore India’s willingness to engage more actively in global trade networks. Talks have also begun with the Gulf Cooperation Council, a bloc representing roughly 15% of India’s global trade. This acceleration contrasts sharply with past decades, when negotiations often stalled amid domestic sensitivities.
Despite optimism, concerns remain about the interim agreement with the United States, with some observers highlighting potential asymmetries that may favor American interests.
Utilisation Gap and Structural Weaknesses
Analysts note that the real test of any free trade agreement lies in its implementation. Historically, India’s FTA utilisation rate has hovered around 25%, significantly below the 70% to 80% typical among developed economies. Complex documentation, audit risks and limited awareness of provisions often discourage exporters from claiming tariff benefits.
Data from consultancy EY shows that between 2017 and 2022, exports to India’s FTA partners rose 31%, while imports from those partners surged 82%. More recent agreements with Australia and the United Arab Emirates show stronger performance, partly due to improvements in trade infrastructure and dispute resolution systems. However, gaps remain.
Rules of Origin and Compliance Challenges
One major hurdle involves Rules of Origin requirements, which determine whether goods qualify for preferential tariffs. Under the EU agreement, exporters must now self-certify origin, increasing legal and financial risks. Failure to comply accurately could lead to penalties and repayment of duties.
Non-tariff barriers, including testing standards, labeling requirements and inconsistent customs interpretation, further complicate compliance. Many exporters may technically qualify for lower tariffs but avoid claiming benefits due to administrative burdens.
Competition from Asian Peers
India faces stiff competition from export-oriented economies such as Vietnam, Bangladesh and Malaysia. Vietnam’s merchandise exports, once far below India’s, have nearly reached parity despite its significantly smaller economy. Its success has been driven by efficient logistics, predictable customs processes and strong supply-chain integration.
India’s manufacturing sector, by contrast, remains fragmented and often constrained by higher logistics costs and regulatory complexity. While the country has made progress in high-tech manufacturing, including smartphone production, it lags in labor-intensive sectors such as textiles, footwear and furniture.
The Road Ahead
With major agreements now in place, policymakers must focus on operational improvements. Streamlining customs procedures, reducing transaction costs and enhancing infrastructure will be critical to translating tariff access into tangible export gains.
Experts argue that competitiveness is ultimately determined by efficiency and execution rather than treaty announcements. If India can address structural bottlenecks, it may better position itself to achieve its ambitious $1 trillion annual export target while attracting investment and generating employment.
