India's big billion-dollar trade deals are done. Now comes the real test
India has spent years negotiating free trade agreements with some of the world's biggest economies. But signing the deals was only half the battle. The bigger challenge now is helping Indian businesses turn preferential market access into exports,...
The ink has dried on India's FTAs. Now comes the real export race. (AI generated image for representative purposes)
India spent years negotiating preferential access to some of the world's largest markets.
It has since signed trade agreements with several key trading partners, while negotiations continue with countries including the US and Canada. More recently, India has also signed an agreement with the European Union, opening the door to one of its biggest export opportunities.
Together, these agreements mark a shift in the country’s trade strategy—from cautiously protecting domestic markets to integrating more deeply with global value chains. But trade experts say the harder part begins after they are signed.
The challenge is no longer securing market access. It is ensuring Indian exporters have the scale, competitiveness, quality standards and compliance capabilities needed to actually use that access.
"The success of an FTA cannot be judged merely by the number of tariff lines on which duties have been reduced. Preferential access only opens the door; Indian companies must be able to enter the market with the right price, quality, scale, certification and delivery reliability," Ajay Sahai, Director General and CEO of the Federation of Indian Export Organisations (FIEO), told ET Online.
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Different deals, different gains
India's trade agreements do not create identical opportunities across sectors. Their impact depends on the partner market and India's existing manufacturing strengths.
The country's network of trade agreements spans partners including the UAE, Australia, the UK, Oman, the European Free Trade Association (EFTA) countries, ASEAN, Japan, South Korea and Singapore, among others.
Sahai said the UK agreement could benefit labour-intensive sectors such as textiles and garments, leather and footwear, marine products, engineering goods, pharmaceuticals and professional services.
The European Union, meanwhile, offers opportunities across engineering goods, automobiles and auto components, pharmaceuticals, chemicals, electronics and textiles. However, exporters will also have to meet stricter sustainability and regulatory requirements.
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The UAE can serve not only as an export destination but also as a gateway for Indian products into West Asia and Africa. Australia and EFTA countries offer opportunities in pharmaceuticals, engineering, food products, technology and high-value services.
Mitali Nikore, founder and chief economist at Nikore Associates, said the Oman agreement could provide an immediate boost to textiles, apparel and handicrafts after the Gulf country eliminated duties on textile and apparel tariff lines.
She cited the UAE and Australia as examples where preferential access has already translated into stronger trade flows. India's non-oil exports to the UAE rose 14% year-on-year during the first three months after the Comprehensive Economic Partnership Agreement (CEPA) came into force, nearly five times the pace of India's overall non-petroleum export growth during the same period.
Merchandise exports to Australia increased from $4 billion in FY2020-21 to $8.57 billion in FY2024-25 following the Economic Cooperation and Trade Agreement (ECTA).
The UK could also offer early gains. Citing the ITC Export Potential Map, Nikore said India has nearly $3.9 billion of unrealised export potential in the UK across electronics and machinery, apparel and textiles, chemicals and pharmaceuticals, processed food and beverages, and gems and jewellery.
"The diaspora matters commercially here. It gives Indian exporters distribution channels, buyer familiarity and consumer demand that no tariff schedule can create," she said.
Yet tariff advantages alone cannot guarantee export growth. Companies facing high production costs, limited manufacturing scale, reliance on imported inputs or difficulties meeting international standards may still struggle to capitalise on them.
Market access is one thing. Using it is another
Even as India expands its network of trade agreements, many exporters are not claiming the tariff benefits available under them.
According to estimates by trade policy think tank Global Trade Research Initiative (GTRI), only around 20-30% of India's eligible exports currently use FTA preferences. In comparison, exporters from partner countries shipping products into India utilise these agreements at around 60-70%.
Ajay Srivastava, founder of GTRI, said the low utilisation rate is not mainly because exporters are unaware of FTAs. Instead, many partner countries already have low import duties, reducing the incentive for companies to complete the additional compliance requirements needed to claim preferential tariffs.
"Suppose our exports to Singapore are $10 billion. Cigarettes and beer account for only $20 million. Even after India signs an FTA with Singapore, we will not use the India-Singapore FTA to export all other products except cigarettes and beer. We will use it only for cigarettes and beer," Srivastava said.
"In this case, FTA utilisation will appear to be only 0.2%."
To claim benefits, exporters must comply with rules of origin, maintain documentation and obtain certifications. Srivastava said when tariff savings are only 1-2%, many businesses conclude that the administrative burden is not worth the benefit.
He added that this challenge could continue with developed economies where tariffs are already low.
"For example, the weighted average tariff in the US is only 2.2%. So, FTA utilisation will remain low because of this reason," he said.
Sahai said this underlines why India's trade policy must now move beyond signing agreements.
"Over the next five years, India must move from an agreement-centric approach to an implementation-centric approach," he said.
Compliance is becoming the new trade barrier
As India signs more agreements with developed markets, experts say trade barriers are increasingly shifting from tariffs to regulatory requirements.
Smita Singh, Senior Partner at S&A Law Offices, said Indian exporters, especially MSMEs, are facing growing pressure to comply with sustainability standards, carbon reporting requirements and supply-chain transparency rules.
India is among the countries most exposed to the European Union's Carbon Border Adjustment Mechanism (CBAM), with more than €6 billion worth of exports to the EU — mainly iron, steel and aluminium — falling within its scope.
"The transition to mandatory third-party verification from 2026 creates a significant burden. Many Indian MSMEs face incomplete upstream emissions data, supply chain data gaps, and a shortage of verification-ready governance systems," Singh told ET Online.
Nikore said discussions with MSMEs highlighted three concerns: difficulty obtaining emissions data from suppliers, lack of internal carbon accounting capabilities and verification costs that can exceed margins on export orders. She added that India's iron and steel exports to the EU declined 13% during the first four months after CBAM came into effect in January 2026.
"The EU is probably India's biggest export opportunity, but it is also the toughest compliance test," she said.
MSMEs remain central to India's export ambitions. Yet only about 0.95% currently export, Nikore noted. Of the 1.58 crore enterprises registered on the Udyam portal, only around 1.5 lakh report export activity.
She said India should focus not only on increasing export value but also on expanding the number of firms participating in global trade.
Certification remains a major hurdle in sectors including textiles, food processing and leather. Referring to a NITI Aayog assessment of India's sports goods industry, Nikore said manufacturers face a 15-20% cost disadvantage compared with competitors in China and Pakistan partly because of expensive certification requirements and inadequate domestic testing infrastructure.
"The reform that would move the needle most is putting accredited testing and compliance support inside MSME clusters, rather than expecting firms to travel to it," she said.
Manufacturing competitiveness will decide the outcome
Experts say India's ability to benefit from FTAs will ultimately depend on whether domestic manufacturing becomes more competitive.
Srivastava argued that India's inverted duty structure continues to weaken exporters by making raw materials more expensive than finished goods.
Duties on inputs such as steel, aluminium and other industrial materials often remain higher than tariffs on finished products imported under trade agreements.
This means Indian manufacturers can pay more for inputs than competitors producing the same goods overseas.
"If someone is manufacturing the same product in Indonesia, China, or South Korea, they get inputs at $100 because their tariffs are zero," Srivastava said.
Sahai also identified inverted duties as a major concern, saying India needs faster correction of such anomalies along with predictable customs procedures, competitive export finance, affordable logistics and stronger quality infrastructure.
Turning access into exports
Getting preferential access is only one part of the export equation. Goods must also move efficiently from factories to global markets.
Nikore described India's logistics progress as "a glass half full". While average port turnaround time has improved to 0.9 days, she said the next phase of reform must focus on multimodal connectivity, dedicated freight corridors, rail-port integration and last-mile evacuation.
Drawing on visits to ports in India, Singapore and Dubai, she said India lags in automation, transshipment capability and skilled manpower.
"Achieving similar standards requires more than just civil infrastructure. It requires skilling the logistics workforce, capital investment from private logistics operators, and multimodal integration, particularly by connecting dedicated freight corridors with ports and industrial clusters," she said.
According to Anil Talreja, Partner at Deloitte India, India's latest trade deals represent a move from traditional tariff-focused arrangements to broader economic partnerships covering goods, services, investment, intellectual property, digital trade, labour and sustainability.
Ultimately, as Talreja puts it, the execution and operationalisation of these agreements will be crucial in shaping India's growth story.
