India’s trade landscape is witnessing a historic shift, with landmark agreements signed with the European Union (EU) and the United States (US). While these deals signal India’s commitment to opening its economy and integrating globally, experts caution that structural challenges could limit the full potential of these free trade agreements (FTAs).
India’s Trade Milestones
The recent agreements mark India’s 10th FTA since 2014, highlighting a departure from previous protectionist policies that delayed negotiations for decades. Fresh talks have also been initiated with the six-nation Gulf Cooperation Council (GCC), representing about 15% of India’s global trade.
Sectors such as gems, jewellery, textiles, and hi-tech manufacturing are expected to benefit from these deals. However, analysts emphasize that the agreements alone cannot drive export growth without deeper trade reform and operational improvements.
Utilization and Implementation Challenges
Historically, India’s FTA utilization rate has been low, around 25%, compared to 70–80% in developed economies. Small and medium exporters often face high paperwork, compliance risks, and a lack of understanding of FTA provisions, which reduces the practical benefits of tariff reductions.
Complex Rules of Origin requirements, documentation costs, non-tariff barriers, and inconsistent customs interpretation further hinder exporters. Under the India-EU FTA, exporters must now self-certify origin claims, taking on legal and financial risk if mistakes occur.
Competitiveness Beyond Tariffs
Experts note that true trade competitiveness comes from efficient operations, reliable logistics, predictable customs clearance, and integrated supply chains. Countries like Vietnam have leveraged these advantages to boost exports, outperforming India in labor-intensive sectors such as textiles, footwear, and furniture.
India’s fragmented manufacturing push and high logistic costs remain key obstacles. Without addressing these challenges, tariff parity alone may not translate into market share gains or private investment.
The Way Forward
While India’s FTAs with the EU and US are historic, policy reforms, infrastructure upgrades, and trade facilitation will be crucial to maximize benefits. Streamlining export processes and reducing transaction costs will support job creation, attract private investment, and help achieve the government’s $1 trillion per year exports target.
