While the focus for New Delhi has been to ink new trade pacts, it is trying to review a few existing ones.

But the exercise will not be easy. It would require a nod from the partner countries, and a bilateral or multilateral approach often spells complexities.   

The legacy FTAs — particularly with Asian partners like ASEAN (Association of Southeast Asian Nations), Japan and South Korea — have failed to yield the desired results.  These pacts have fallen short of delivering promised export gains. 

Many of these agreements lacked contemporary provisions on services, investment, rules of origin, and regulatory coherence, making it difficult for Indian exporters to fully utilise tariff concessions. On the other hand, import surges have been hurting the domestic industry.

A senior government official told The Secretariat that the issue has also been brought to the notice of the Prime Minister’s Office (PMO).  

“India signed a host of FTAs in the past few months, and these have been successful as they have been designed to create a win-win for both partners, but there is an urgent need to review the ones signed years ago. They must be reviewed keeping in mind the changing economic and supply chain dynamics the world over,” the official said. 

“In case the other party is not keen, it hits a roadblock,” a source said.  

Future trade agreements must contain mandatory review clauses, ideally every five years, allowing governments to respond to changing trade patterns, emerging industries, and unintended consequences, experts said.

Problems With Legacy FTAs

The main criticism of the legacy FTAs is that they focused heavily on tariff reductions while paying insufficient attention to non-tariff barriers, domestic competitiveness, and the practical ability of Indian companies to use preferential access.

The tariff structure also led to an imbalance. India’s average most-favoured-nation (MFN) tariff is estimated at around 12.6%, compared with less than 4% in several partner economies, including Japan and ASEAN members. As a result, tariff concessions create a much larger opening for foreign exporters compared to domestic exporters.

This imbalance becomes even more serious because of the inverted duty structure. Under such a structure, imported raw materials or components attract higher duties than finished products. Indian manufacturers are then placed at a disadvantage: importing inputs becomes expensive, while foreign companies may ship completed goods into India at preferential rates.

“If we do not reform our trade, both our policies and our procedures, then we will not be able to take advantage of these agreements,” Rahul Ahluwalia, Founder Director, Foundation for Economic Development, told The Secretariat.

The ASEAN FTA

The ASEAN-India Trade in Goods Agreement, implemented in 2010, is the most prominent example of the concerns surrounding India’s older FTAs. The 11-member ASEAN grouping includes Thailand, Singapore, Indonesia, Malaysia, the Philippines, and Vietnam.

As against India’s exports of US$ 38.42 billion to ASEAN nations in 2025-26, the imports exceeded US$ 84 billion, leaving a trade deficit of about US$ 45 billion.

ASEAN exporters have been able to sell products such as electronics, palm oil, chemicals, and plastics in the Indian market. Indian exporters, meanwhile, continue to face certification requirements, sanitary and technical standards, and other non-tariff barriers.

The problem is not simply that India imports more than it exports. A trade deficit can be economically useful when imports consist of capital goods, technology, or intermediate products that expand domestic production. The concern arises when imports displace local manufacturing without generating comparable opportunities for Indian exporters.

The ASEAN experience also illustrates how tariff concessions can interact with domestic weaknesses. High logistics costs and regulatory complexity reduce the ability of Indian businesses to compete, even when formal market access is available.

Agreements With Japan, South Korea

India’s agreements with Japan and South Korea were intended to open high-value markets and encourage investment in industrial sectors. Both agreements were signed in the early 2010s, but export growth has remained limited relative to expectations.

India’s merchandise exports to Japan were approximately US$ 6.04 billion in FY2025-26, against imports of about US$ 21.44 billion, resulting in a deficit of around US$ 15.4 billion. Exports to South Korea were approximately US$ 6.01 billion, while imports stood at roughly US$ 21.35 billion, producing a deficit of about US$ 15.3 billion.

The composition of trade too is important. India imports specialised machinery, steel, electronics, auto parts, polymers, and industrial chemicals. Its exports include petroleum products, raw materials, marine goods, aluminium, and iron ore.

Tariff reductions did not help Indian firms enter established Japanese and South Korean supply networks. Japanese corporate groups and South Korean chaebols typically rely on long-standing suppliers that meet demanding technical and quality standards. Without stronger domestic capabilities and mutual recognition of standards, Indian companies have only struggled to move up the value chain.

India’s New Trade Pacts

Meanwhile, addressing a workshop on leveraging FTAs in New Delhi, Commerce and Industry Minister Piyush Goyal said over the next few months and couple of years, India will endeavour to conclude FTAs with Canada, Mexico, Chile, Mercosur, SACU (South African Customs Union), GCC (Gulf Cooperation Council) and Israel, and make efforts to review existing trade agreements with ASEAN, Korea, and Japan.

Observing that nine FTAs have been signed by the Modi government, Goyal said, “with negotiations on with several other nations, nearly 75% of global trade will eventually be available to our producers and exporters.”

The emphasis, according to a recent government note, “is on translating market access into wider export participation, investment, and employment while safeguarding domestic priorities. This balanced approach aims to strengthen the contribution of FTAs to India’s journey towards Viksit Bharat by 2047”.

The minister urged the industry to leverage these agreements by focusing on quality, scale, and technology upgradation to excel globally. 

Limited Utilisation Of FTA Benefits By Indian Exporters

One of the biggest challenges is the abysmally low utilisation of trade benefits.

An analysis by the think tank Global Trade Research Initiative (GTRI) revealed that Indian exporters use FTA preferences in only about 20% to 30% of eligible transactions. Partner-country exporters, by contrast, record utilisation rates of roughly 60% to 70%. 

High compliance costs, complicated rules of origin and documentation requirements discourage Indian firms, particularly micro, small, and medium enterprises (MSMEs), from claiming lower tariffs.

New Trade Pacts Vs Old Ones

The earlier model emphasised multilateralism, broad tariff liberalisation, and cost-efficient global supply chains. The new model, however, now places greater weight on supply-chain resilience, focus on strategic sectors, and reciprocity.

Recent agreements with the UAE, Australia, EFTA, Oman, New Zealand, and the UK reflect this change. They seek to combine goods-market access with services mobility, investment commitments, and access to critical inputs.

The India-EFTA Trade and Economic Partnership Agreement is particularly notable because it links tariff preferences with a targeted investment commitment of US$ 100 billion over 15 years. Such provisions represent an attempt to ensure that market access produces investment and employment, rather than merely increasing imports.

India has also managed to remain firm on protecting sensitive sectors such as agriculture, dairy, pharmaceuticals, and selected manufacturing industries.

The Path Ahead

As suggested by GTRI, India must have an FTA Impact Monitoring Authority to oversee implementation of the agreement and suggest corrective measures. Such measures would help policymakers assess whether agreements are delivering the promised export and investment benefits.

Future FTAs ought to be designed with global value chains in mind, trade experts said. The focus must extend beyond conventional tariff concessions to strategic sectors such as critical minerals, clean-energy inputs, technology, pharmaceuticals, and professional services. 

The central challenge is clear: trade agreements must become instruments of export growth and industrial development, rather than merely channels through which cheaper imports enter the Indian market.

According to Goyal, the “government, industry, and MSMEs working together will be key to translating market access into real export growth and job creation in the coming years.”