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India inks historic trade agreements with EU and US
New Delhi has finalized two major free trade agreements (FTAs) with the European Union and the United States in early 2026, marking a significant shift in its trade policy. The deals, dubbed the "mother" and "father" of all trade pacts respectively, represent India's 10th FTA since 2014 and signal a departure from its long-standing protectionist stance.
Expanding trade horizons
Following these agreements, India has initiated negotiations with the Gulf Cooperation Council (GCC), a six-nation bloc that accounts for 15% of its global trade. While the deals are seen as a positive step, analysts caution they are not a panacea for boosting exports or replacing deeper structural reforms.
Utilization gap and structural hurdles
Historically, India has struggled to fully capitalize on FTAs, with a utilization rate of just 25%, compared to 70-80% in developed economies. Sumedha Dasgupta of the Economist Intelligence Unit attributes this to bureaucratic paperwork, audit risks, and a lack of awareness among small exporters about FTA provisions.
Data from consultancy EY reveals that between 2017 and 2022, India's exports to FTA partners grew by 31%, while imports surged by 82%, highlighting an imbalance in leveraging preferential access. However, recent agreements with Australia and the UAE have shown stronger export growth, credited to improved trade infrastructure and dispute resolution mechanisms.
Rules of Origin and compliance challenges
Kiran Kotla, CEO of Dista, a firm specializing in export compliance, identifies key obstacles such as complex Rules of Origin requirements, high documentation costs, non-tariff barriers, and inconsistent customs interpretations. Many exporters qualify for lower tariffs but end up paying full duties due to the slow, risky, or expensive process of proving eligibility.
The India-EU FTA introduces self-certification for origin claims, shifting legal and financial risks onto exporters. Ajay Srivastava of the Global Trade and Research Initiative warns that incorrect claims could trigger penalties, emphasizing the need for better understanding and application of these rules.
Competitiveness gaps with Asian peers
Experts argue that India's trade success hinges on operational efficiency, not just treaty terms. Vietnam's advantage stems from faster logistics, predictable customs clearance, and deep supply-chain integration. Priyanka Kishore, founder of Asia Decoded, notes that India's manufacturing push has been fragmented and less export-oriented compared to Vietnam or Bangladesh, which have prioritized large-scale foreign direct investment and export promotion policies.
World Bank data shows Vietnam's merchandise exports, once a third of India's in 2010, have nearly reached parity despite its smaller GDP. India lags in labor-intensive sectors like textiles, footwear, and furniture, where competitors like Vietnam and Bangladesh outperform it.
"Competitiveness is won in operations, not treaties. Without faster logistics, reliable infrastructure, and lower transaction costs, tariff parity alone won't translate into market share gains."
Kiran Kotla, CEO, Dista
Path forward: Streamlining trade barriers
With the FTAs now in place, Delhi must address logistical and regulatory irritants to attract private investment, create jobs, and meet its $1 trillion annual exports target. Analysts stress the need for simplifying customs procedures, reducing import duties, and improving infrastructure to enhance India's global trade competitiveness.
