From agreements to opportunity: India’s next export push

Currently, India is at the centre of a pivotal trade moment. After years of cautious and often defensive engagement, New Delhi has inked preferential agreements with the EU, UK, Australia, the United Arab Emirates (UAE), Oman, and New Zealand, while negotiations are advancing with Canada, the Gulf Cooperation Council (GCC), and the Eurasian Economic Union. In a world reshaped by tariff shocks and China+1 supply chain anxiety, this diplomatic acceleration is not merely welcome; it is strategically overdue.

But beneath the celebratory headlines lies a sobering truth: signing a free trade agreement (FTA) is the beginning of economic work, not its culmination. The real test and India’s recurring weakness is utilisation.

THE GAP BETWEEN ACCESS AND ADVANTAGE
India’s earlier FTAs offer a cautionary ledger. Agreements with ASEAN, Japan, and South Korea saw utilisation rates languish, between 5% and 25% in several sectors. Exporters, faced with complex rules of origin, opaque documentation requirements, and high compliance costs, found it simpler to pay the standard Most Favoured Nation (MFN) tariff than to claim the preferential one. The FTA existed on paper; the benefit did not reach the factory floor.


The contrast with Australia is instructive. The India-Australia Economic Cooperation and Trade Agreement, signed in 2022, achieved utilisation rates approaching 86%—three to four times the older agreements. The difference was not luck. It was designed with cleaner rules, streamlined processes, and active exporter support. It proved that high utilisation can be achieved, but it requires deliberate effort.

An FTA’s economic value lies not in its signature, but in its uptake.

FOUR BARRIERS THAT REPEATEDLY BITE
The India-EU FTA opens preferential access to the world’s largest single market. Similar opportunities beckon across the Gulf and Oceania. But four structural constraints, if left unaddressed, will blunt these gains.

Rules of origin must reflect production realities. Many Indian manufacturers rely on imported inputs. If value-addition thresholds are set prohibitively high, exporters simply fail to qualify for preferences, making the FTA route economically irrational. Getting the rules of origin right is not a technicality; it is the architecture on which utilisation rests.

Regulatory barriers have overtaken tariff barriers in developed markets. European buyers are governed by stringent sanitary, phytosanitary, and sustainability standards. Carbon border adjustment mechanisms, digital governance norms, and supply chain due diligence laws are reshaping trade flows as powerfully as customs duties. An FTA can eliminate a tariff overnight; building the testing labs, traceability systems, and compliance infrastructure to meet European standards takes years of sustained investment.

Micro, small, and medium enterprises (MSMEs) remain outside the FTA ecosystem. Large exporters have legal teams to navigate tariff schedules and certification pathways. The smaller firms that generate the bulk of employment mostly do not. Without systematic outreach, utilisation gains risk concentrating among a narrow set of firms, deepening rather than broadening India’s export base.

Finally, logistics bottlenecks erode preferential margins. Port delays, fragmented documentation systems and unpredictable customs clearances can render tariff savings irrelevant. Trade efficiency is not separate from trade policy; it is part of it.

EXECUTION MUST NOW LEAD POLICY
India’s policymakers have signalled that the next phase will pivot towards awareness, standards upgradation and export ecosystem strengthening. That pivot is exactly right, and it cannot come soon enough.

Certificate-of-origin procedures must be simplified and digitised so that claiming preferences is seamless rather than bureaucratic. Industrial policy instruments, particularly the Production Linked Incentive (PLI) schemes, must be explicitly aligned with the market openings created by FTAs. Standards infrastructure in agriculture, pharmaceuticals and engineering goods must be upgraded to match partner-country requirements. And real-time monitoring of utilisation rates, by sector and geography, must become standard practice so that bottlenecks are caught early rather than discovered in retrospect.

Most importantly, utilisation must become a performance metric. The number of agreements signed is politically visible; the percentage of exporters actually using them is economically decisive. India should publish and track utilisation data the way it tracks export figures—publicly, regularly, and with accountability.

THE STAKES ARE NOT ABSTRACT
Vietnam and Mexico did not become global value chain anchors by accident. They leveraged dense FTA networks with disciplined domestic competitiveness, reliable logistics, consistent quality, and regulatory predictability into a preferred sourcing status. India has FTA access; what it now needs is the execution to match.

The India-EU agreement, in particular, will be a defining test. Europe’s regulatory intensity means Indian firms must upgrade rapidly if they are to capture high-value segments rather than cede them to more prepared competitors. The opportunity is historic; so is the responsibility it confers.

Trade agreements open doors. India has spent years securing them. The challenge now is to walk through them systematically, with every exporter in tow, not just the largest ones.

Javeria Maryam is a Research Fellow and Badri Narayanan Gopalakrishnan is the Founder of Infinite Sum Modeling LLC, a global economics and strategy research and advisory firm. Views are personal.