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India’s and global trade agreements

15 Dec 2025 GS 3 Economy
India’s and global trade agreements Click to view full image

India’s Expanding FTA Landscape

  • WTO data: India has 20 regional or free trade agreements.

  • Does not include the latest FTAs with:

    • United Kingdom (signed July)

    • EFTA (in force from October)

  • Ongoing negotiations with:

    • United States, European Union, Canada, Southern African Customs Union.

  • Heightened urgency due to U.S. tariffs of up to 50 percent on key Indian exports.

RCEP Context

  • Reports suggested the possibility of re-engagement with the Regional Comprehensive Economic Partnership (RCEP).

  • India exited in 2019 due to:

    • Concerns on farm sectors

    • Rules of origin

  • Government has not accepted accession; only explored consultations.

Need for Deeper Structural Change

  • Trade diversification requires more than signing FTAs:

    • Transformation of productive sectors.

    • Integration into global value chains (GVCs).

Problems with Earlier FTAs (ASEAN, Japan, Korea)

  • Trade deficit trends:

    • ASEAN deficit: from USD 10 billion (2017) → USD 44 billion (2023).

    • Japan: exports rose but imports of high-value, capital-intensive goods rose even faster.

  • Structural and policy-driven reasons:

    • Weak mutual recognition agreements (MRAs) on standards, certifications, rules of origin.

    • FTAs not tailored to India's sectoral strengths.

    • Limited consultation with industry bodies.

    • Poor domestic dissemination of FTA benefits, while partners utilised concessions fully.

Course Correction

  • Ongoing review of earlier FTAs.

  • Better outcomes from India–UAE CEPA:

    • Non-oil trade: approx. USD 100 billion in FY25 (DGFT data).

    • India now allocates gold TRQ via competitive bidding.

Guidance for Upcoming FTAs

  • With United States:

    • Sectoral consultation required: services, seafood, engineering goods, textiles.

  • With EU:

    • Focus on carbon-intensive sectors (iron and steel, cement).

    • Consider implications of Carbon Border Adjustment Mechanism (CBAM).

Beyond Signing FTAs

  • FTAs are only the starting point.

  • India must support exporters via:

    • Strengthened standards ecosystem.

    • Improved trade infrastructure.

    • Technology upgradation.

    • Enhanced market intelligence.

Prelims Practice MCQs

Q. With reference to India’s participation in global trade agreements, consider the following statements:

  1. India has already acceded to the Regional Comprehensive Economic Partnership (RCEP) as of 2025.

  2. India’s recent FTAs with the United Kingdom and EFTA are not yet included in the WTO’s count of India’s FTAs.

  3. India currently faces high U.S. tariffs on certain export items, which has accelerated trade negotiations.

Which of the statements given above is/are correct?

A. 1 only
B. 2 and 3 only
C. 3 only
D. 1 and 2 only

Answer: B
Explanation:

  • Statement 1 is incorrect: India has not acceded to RCEP; only exploratory consultations have taken place.

  • Statement 2 is correct: WTO count excludes the most recent FTAs with the UK and EFTA.

  • Statement 3 is correct: India faces tariffs up to 50 percent on key exports to the U.S.

Q. Which of the following are identified as reasons for India’s widening trade deficit under earlier FTAs with ASEAN, Japan and South Korea?

  1. Lack of strong mutual recognition agreements on quality standards.

  2. FTAs were not sufficiently aligned with India’s sectoral strengths.

  3. Excessive domestic utilisation of preferential margins by Indian exporters.

Select the correct answer using the code below.

A. 1 and 2 only
B. 2 and 3 only
C. 1 only
D. 1, 2 and 3

Answer: A
Explanation:

  • 1 and 2 are correct: Weak MRAs and poor FTA customisation contributed to deficits.

  • 3 is incorrect: The problem was the opposite; India underutilised preferential margins, while partner countries used them more effectively.

Q. With reference to India–UAE CEPA, consider the following statements:

  1. It is cited as an example of improved FTA outcomes compared to earlier agreements.

  2. Non-oil trade between the two countries reached around USD 100 billion in FY25.

  3. The trade agreement has reduced India’s overall import dependency in capital-intensive goods.

Which of the statements above is/are correct?

A. 1 and 2 only
B. 2 and 3 only
C. 1 only
D. 1, 2 and 3

Answer: A
Explanation:

  • Statements 1 and 2 are correct.

  • Statement 3 is incorrect; the passage does not mention reduced import dependency through CEPA.



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