What will happen to economy if India-US FTA doesn't happen? RBI Governor reveals

MUMBAI: The central bank governor Sanjay Malhotra said that the failure in closing the India-US bilateral trade deal could have a negative impact on the Indian economy, but said trade agreements with other countries could help mitigate the impact.

"The impact depends on to what extent tariffs are going to be applied. So, it's premature to answer. But obviously it will have some negative impact," Malhotra said during the post-monetary policy press conference in response to a query on the impact on the economy if the trade deal with the US fails to materialise. However, India has concluded or implemented a series of trade agreements in recent months, which could help diversify its export markets.

"At the same time, we have had a number of trade agreements now in the recent past. Many of them, some of them have been officialised, others are in the pipeline," he said. "They will help the industry at the same time help diversify its exports. So all these things, I think, will mitigate the effect in case there is an additional tariff on some of the sectors."


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On October 1, US Trade Representative Jamieson Greer said an India-US trade agreement was not imminent. An interim trade agreement with the US was announced in February 2026, with negotiations continuing since April. Subsequently, after finance minister Nirmala Sitharaman at New Delhi on October 5 said India-US bilateral trade discussions had "reached a plateau", beyond which further concessions would be difficult.

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India has signed trade agreements with the UK and New Zealand, while several others are in the pipeline. Around 10 trade agreements are under discussion, including new negotiations with the Eurasian Economic Union, Peru, Chile, Israel, Canada and Maldives. Existing agreements such as the India-Korea CEPA and India-Sri Lanka ETCA are also being upgraded.