FTAs alone won’t make India a manufacturing power: GTRI’s Ajay Srivastava

India is negotiating some of its most ambitious trade agreements in recent history. With negotiations underway or deals concluded with the US, UK, the European Union (EU), and New Zealand, preferential trade arrangements could soon cover more than 60% of the country’s exports. The key question, however, is whether these agreements will strengthen India’s long-term economic competitiveness or expose its underlying structural weaknesses.

Ajay Srivastava, Founder of the Global Trade Research Initiative (GTRI), argues that while free trade agreements (FTAs) can enable market access, they are no substitute for a strong manufacturing base. He says India must shift its focus from tariff negotiations to improving domestic competitiveness if the country wants to fully benefit from these trade deals.

He disputes the popular narrative that globalisation is ending. Srivastava, a former Indian Trade Service officer who was part of India’s WTO and FTA negotiating teams, argues that free trade is not disappearing, rather, major economies are increasingly embracing protectionist policies and industrial strategies to safeguard their own economic interests. “More than 80% of global trade still takes place under established international trade rules.” he says.


However, he argues that the world’s largest economies, the US, EU, and China, are increasingly embracing industrial policy and protectionism. “The concern is not that free trade has ended. The concern is that the biggest economies are becoming more protectionist, and that creates challenges for countries like India.”

India must strengthen manufacturing
India, Srivastava argues, can achieve far more if manufacturing receives greater policy attention. “If we focus much more on manufacturing, our exports will increase. The government is taking the right steps, but the pace must accelerate.”
According to him, exports are ultimately a reflection of manufacturing capability, not merely trade agreements.

One of the biggest concerns is India’s widening trade deficit with many FTA partners, he says, pointing out that India’s imports from countries, such as Japan and South Korea, have increased far more quickly than exports since the agreements came into force.

Similarly, imports from newer FTA partners, including Australia, the United Arab Emirates (UAE), and Switzerland, are also rising at nearly twice the pace of exports. The structural reason, he explains, is simple. “Most developed economies already maintain very low import tariffs. Therefore, India gains little additional market access when tariffs fall further. India, however, maintains relatively higher tariffs.”

“When India cuts tariffs under an FTA, partner countries receive a significant price advantage in the Indian market, whereas Indian exporters receive only limited additional benefit because tariffs abroad were already low.”

India-US trade deal: What’'s the incentive?
Discussing the proposed India-US trade agreement, Srivastava says the negotiations face a fundamental challenge.

The joint statement issued earlier this year was built around the assumption that the US would reduce reciprocal tariffs in return for Indian concessions.

However, after US courts questioned the legality of those reciprocal tariffs, he believes the negotiating landscape changed dramatically. “If the US is no longer in a position to offer tariff concessions, the obvious question becomes: what exactly is India receiving in return?”

He believes this uncertainty explains why negotiations have slowed.

Agriculture: India’s biggest red line
Agriculture continues to be among the most sensitive issues in India-US negotiations. According to Srivastava, opening India’s farm sector involves much more than lowering tariffs.

He argues that American concerns extend to India’s minimum support price (MSP) system and broader agricultural policies. “Agriculture is the livelihood of nearly half of India’s population. This is not merely a trade issue.”

He warns that heavily subsidised American agriculture could destabilise India's food security if market access is opened without safeguards.

Drawing from history, he recalls that India once agreed under international pressure to bind tariffs on wheat and rice at zero during the General Agreement on Tariffs and Trade (GATT) era.

After the Green Revolution transformed India into a food-surplus nation, New Delhi had to renegotiate those commitments at significant cost. “It’s a lesson India cannot afford to forget.”

Beyond trade, Srivastava argues that India’s foreign policy should remain independent.

The US remains an important strategic partner, he says, but India should simultaneously maintain strong engagement with Europe, Russia, Gulf countries, and China wherever national interests align. “We should have balanced relations with everyone without compromising India's sovereign interests.”

China’s rise has changed America’s Asia strategy
According to Srivastava, one of the biggest geopolitical shifts underway is America’s reassessment of its China strategy.

Earlier initiatives, such as the Indo-Pacific framework, supply-chain resilience, and China-plus-one, were designed to reduce dependence on China.

However, he believes those efforts have delivered only limited success because global manufacturing remains deeply integrated with Chinese supply chains.

“China still dominates processing of critical minerals, electronics, solar components, and several manufacturing ecosystems.”"

As a result, many products exported from countries such as Vietnam still contain substantial Chinese inputs.

India-UK FTA: Opportunity with limitations
Srivastava believes the India-UK agreement will benefit sectors such as garments, engineering goods, and gems. However, tariff reductions alone will not guarantee export growth. British consumers demand high product quality, certifications, and strict regulatory compliance.

“Indian MSMEs will need substantial investment in quality standards if they wish to compete successfully.”

He cites India’s experience with Japan, where zero-duty access for garments failed to translate into significant export gains because Indian manufacturers struggled to meet Japanese quality requirements.

CBAM: A growing concern
The EU’s Carbon Border Adjustment Mechanism (CBAM), particularly for steel and other carbon-intensive sectors, remains another major challenge.

Even as tariffs under an India-EU FTA may eventually decline, Indian exporters could still face significant carbon-related taxes.

“This creates a situation where tariff concessions are offset by climate-related trade barriers.”

He believes India may eventually need calibrated countermeasures if such barriers substantially affect exports.

Vietnam’s success can’t simply be replicated
Vietnam is often cited as a model for export-led manufacturing. Srivastava agrees that Vietnam has successfully attracted multinational investment but notes that its strategy differs fundamentally from India’s.

Vietnam has offered extensive market access and investment flexibility to foreign companies.

However, he argues that such an approach may be less suitable for a large economy like India.

“Large economies such as India, China, and the US cannot simply copy the model of smaller export-dependent economies.”

China’s manufacturing lesson
Asked where India stands compared with China, Srivastava’s assessment is candid. China, he says, invested relentlessly in manufacturing capacity over several decades. India, by contrast, liberalised its economy but did not build comparable manufacturing depth.

His recommendation is highly specific.

Rather than discussing manufacturing only in broad policy terms, India should identify thousands of individual products currently imported, particularly from China, and systematically develop domestic production capabilities. “We should become a product-nation.”

The road ahead
Srivastava believes FTAs remain important instruments of economic diplomacy, but they cannot substitute for domestic competitiveness.

Without stronger manufacturing, better product quality, deeper supply chains, and greater industrial capability, India may continue to witness imports growing faster than exports—even under preferential trade agreements.

“Manufacturing is India’s real long-term strategy. Trade agreements can help, but they cannot replace competitiveness,” concludes Srivastava.