India’s utilisation of free trade agreements (FTAs) remains significantly lower than that of several other countries, Chief Economic Adviser V. Anantha Nageswaran on Saturday said, pointing to a structural gap between trade policy and on-ground industry adoption, these remarks comes in the background of data shows the country's trade deficit with FTA partner nations is widening sharply.
"Free trade agreement utilisation by India is very poor compared to other countries," Nageswaran said, adding that tariff benefits negotiated under such pacts are not being fully leveraged by exporters.
Speaking at the Isaac Centre for Public Policy (ICPP) Growth Conference hosted by Ashoka University, he argued the expanding slate of agreements could help India's manufacturing attractiveness, saying the “spate of free trade agreements… will hopefully convince global manufacturers that India isn't facing high tariffs along with the interim agreement with the United States. So therefore, to some extent, India as the center of production both for the domestic market and for the global market, because we are not facing high tariffs, that can also be a magnet."
According to recently released data by Commerce Ministry in April, India's exports to South Korea declined 9.3 per cent to USD 5.81 billion in 2024-25, while imports from Korea dipped only marginally to USD 21 billion during the same period, leaving a deficit of approximately USD 15.2 billion. Additionally, India and South Korea agreed in April to begin negotiations to upgrade their CEPA amid growing global trade disruptions, with Prime Minister Narendra Modi saying the partnership would span "chips to ships, technology to energy."
The next round of CEPA upgrade negotiations is scheduled to take place in May 2026.
The remarks are backed by findings in Niti Aayog's Trade Watch Quarterly report for Q1 FY26. India's exports to FTA partners fell 9 per cent year-on-year (YoY) to USD 38.7 billion in the April-June quarter, while imports from these countries rose 10 per cent to USD 65.3 billion, pushing the trade deficit with FTA partners to USD 26.7 billion, up 59 per cent from the same period a year earlier. The think tank noted that the contraction in FTA exports coupled with stronger import growth “suggests a demand recovery skewed toward imported inputs and energy products rather than export-oriented manufacturing, highlighting the need for deeper value chain integration and competitiveness within India's existing trade deals.”
The Asean bloc was the primary driver of the deficit, with exports to the grouping, India's largest FTA export market, contracting 16.9 per cent . Major declines were recorded in Malaysia at 39.7 per cent and Singapore at 13.2 per cent. Efforts to renegotiate the existing India-Asean trade agreement remain inconclusive, with both sides missing an end-2025 deadline, according to the think tank's reports.
"This conflict has come at a time when we were looking at another year of seven-plus per cent GDP growth… but in the light of what has transpired since then, the outlook has changed," said Nageswaran, flagging wider macroeconomic pressures bearing down on trade.
He identified four channels through which global disruptions are feeding into the economy, price impact, trade impact as global growth slows, logistics cost impact, and remittance shock.
These pressures, he noted, make it more critical for India to effectively utilise its trade agreements. “The spate of free trade agreements… will hopefully convince global manufacturers that India isn’t facing high tariffs… and that can be a magnet,” he said.
On crude oil import dependence, a key driver of the FTA deficit, Nageswaran urged perspective. "Belgium doesn't grow cocoa, but Belgium is known for its chocolates," he said, comparing India's position to China's role in rare earth processing.
"China is known for its processing capacity, even if not all the rare earths and critical minerals are available in China." He added that on the supply side, the current disruption “is only a price shock and not a supply shock also for India, which may be the case for others.”
On the external competitive environment, Nageswaran flagged China's recently notified supply chain restrictions, Orders 834 and 835, as a structural challenge. "Language criminalises information-gathering activities related to industrial and supply chains in China," he said.
Describing the orders as deliberately elastic, "the very uncertainty itself is the enforcement mechanism." He said India needs to develop institutional counterparts, including a supply-chain security framework and an equivalent of the American CFIUS mechanism for screening inward investments.
He also directed pointed criticism at India's corporate sector, noting that despite BSE, NSE 500 company profits growing at 30.8 per cent per annum post-covid "very few countries had that", private capital formation had remained disappointing.
"Corporates and the second or third generation entrepreneurs chose to accumulate those cash profits and probably set up family offices elsewhere rather than investing in real assets on the ground," he said.
Despite the deteriorating FTA trade balance, India's overall export performance showed some resilience. India's total exports stood at USD 860.09 billion in FY26, up 4.22 per cent YoY. Electronics emerged as a standout sector, with exports growing 47 per cent YoY and accounting for over 11 per cent of total exports, in contrast to a sharp decline in petroleum exports.
Even as the utilisation problem persists, India has expanded its treaty footprint in recent years. Starting with India-Mauritius in 2021, the India-UAE CEPA followed in May 2022, and the India-Australia Economic and Trade Agreement was implemented in December 2022. India then signed the EFTA TEPA in March 2024, which entered into force in October 2025. The India-UK CETA was signed in July 2025 and India-Oman CEPA in December 2025. The India-New Zealand FTA was announced on 22 December 2025, followed by the India-EU FTA on 27 January 2026. India also delivered a framework for an interim agreement with the United States on 7 February 2026.
Apart from concluded agreements, the Commerce Ministry confirmed that active negotiations are currently ongoing with six partners: Australia, Sri Lanka, Peru, Chile, the Eurasian Economic Union (EAEU), and Israel. The India-Australia CECA negotiations began in February 2023, with 11 rounds held so far. Talks with Sri Lanka for an Economic and Technology Cooperation Agreement began as far back as 2015, with 14 rounds completed. The first round of negotiations with Israel was held in February 2026.
Additionally, Terms of Reference have been signed for a set of further agreements, a Preferential Trade Agreement with the Philippines, an FTA with the Maldives, an FTA with the Gulf Cooperation Council, and a CEPA with Canada.
Nageswaran cautioned that the combination of low FTA utilisation and a challenging global environment requires a systemic response. "We are facing a global reality that is a lot tougher, and we need to change the way we think and execute… at the corporate level, household level and also at the policy level," he said. |
