The India-New Zealand FTA, which came into force on 20 October, provides zero-duty access from day one for 100% of Indian exports to New Zealand.

But a June 2026 report by the Global Trade Research Initiative (GTRI), founded by Ajay Srivastava, argues that preferential access means little unless businesses can claim the benefits, compete on cost and quality, and overcome regulatory barriers in destination markets.

Trade Deficits Expose Imbalance

GTRI’s analysis of calendar year 2025 data shows that India’s 15 implemented FTAs, covering 27 countries, accounted for US$ 126.7 billion in exports and US$ 242.8 billion in imports, leaving a merchandise trade deficit of US$ 116.1 billion.

The longer-term trend is also uneven.

Between 2007-09 and 2023-25, India’s average annual trade deficit with the Association of Southeast Asian Nations (ASEAN) increased 381%, while deficits with Japan and South Korea rose 318% and 268%, respectively. The corresponding increase in the deficit with the rest of the world was 142%. India’s combined average annual deficit with ASEAN, Japan and South Korea reached approximately US$ 62 billion over the latest three-year period examined by GTRI.

South Asia was an exception: India’s trade surplus with the region increased from US$ 6.7 billion to US$ 20 billion over the same comparison period.

These figures do not establish that FTAs alone caused the deficits. Imports of machinery, electronics components and industrial inputs can support domestic production and exports, while trade balances also reflect demand, commodity prices, and industrial capacity. But the figures raise questions about whether Indian exporters are gaining advantages comparable to those enjoyed by foreign suppliers in India.

GTRI estimates that implemented FTAs account for 28.5% of India’s exports and 32.2% of its imports. Another nine agreements involving 42 countries are at different stages of negotiation, conclusion or implementation. Together, the 69 countries account for 75.3% of India’s exports and 65.5% of imports.

These figures measure total trade with partner countries, not transactions that actually use preferential tariffs. They therefore show the scale of the markets involved, but not how much additional trade the agreements have generated.

Tariff Asymmetry, Low Utilisation

GTRI identifies differences in tariff structures as one reason for the uneven outcomes. It puts India’s trade-weighted most favoured nation (MFN) tariff at approximately 12.6%, compared with tariffs below 4% in several major partner economies, including Japan, Australia, Malaysia, and the United Arab Emirates.

The report estimates that 100% of imports into Singapore, 91.9% into Japan and 86.4% into Malaysia face tariffs below 5%. In India, the comparable share is 28.3%. Only 4.6% of Indian imports enter duty-free under MFN treatment, while 68.7% face normal customs duties.

A tariff reduction in India can therefore give foreign suppliers a substantial price advantage, while Indian exporters entering markets where ordinary tariffs are already low may gain much less from preferential treatment.

The problem is compounded by low utilisation. GTRI estimates that only 20-30% of India’s eligible exports use FTA preferences, compared with 60-70% of partner-country exports entering India. These are estimates, not a comprehensive transaction-level audit, but they point to a gap between negotiated access and commercial use.

Exporters must prove that their products meet rules-of-origin requirements, obtain documentation, and satisfy certification procedures. For manufacturers using components from multiple countries, establishing eligibility can be complicated; where tariff savings are small, compliance costs may outweigh the benefit, particularly for micro, small, and medium enterprises (MSMEs).

The government needs agreement-specific data on preference utilisation, duties saved, participating firms, and MSME beneficiaries. Digitising certificates of origin can reduce paperwork, but exporters also need clear guidance, predictable customs decisions, and affordable testing and certification. Without such measures, headline tariff coverage risks overstating the practical value of an agreement.

New Zealand Offers Test Case

The New Zealand agreement provides zero-duty access for Indian textiles, apparel, leather, footwear, engineering goods, pharmaceuticals and other exports. The two governments aim to double bilateral trade in goods and services by 2030, while New Zealand has committed to facilitating US$ 20 billion in investment into India over 15 years.

India’s merchandise exports to New Zealand were approximately US$ 566.5 million in fiscal 2025-26, a modest base from which to pursue substantially higher sales. The figure predates implementation and serves as a benchmark, not evidence of the agreement’s impact. The investment commitment, similarly, is a long-term objective rather than money already invested.

Exporters must now identify products for which the tariff reduction creates a genuine price advantage, secure buyers and distributors, meet product standards, and deliver reliably. Zero tariffs cannot compensate for inadequate scale, weak branding or inconsistent supply.

The agreement also offers New Zealand suppliers preferential access to India through staged tariff reductions and selected agricultural quotas. Its benefits will depend on how effectively businesses on both sides use the concessions and whether increased trade supports domestic production.

India’s experience with the UAE and Australia suggests that FTAs can accompany export growth.

Merchandise exports to the UAE reached US$ 37.36 billion in fiscal 2025-26, while exports to Australia rose from US$ 4 billion in 2020-21 to US$ 7.28 billion in 2025-26 after their trade agreement took effect in December 2022. But aggregate growth alone cannot establish how much was caused by tariff preferences or how widely the gains were distributed.

China Highlights Non-Tariff Barrier

Finance Minister Nirmala Sitharaman’s recent comments on China underline the limits of tariff diplomacy. “With China, I think our trade balance is against us, and it is growing exponentially,” she said at an Atlantic Council interaction on the sidelines of the International Monetary Fund-World Bank annual meetings in Bangkok on 16 October, identifying non-tariff barriers as a major obstacle.

India’s merchandise trade deficit with China reached approximately US$ 112.6 billion in fiscal 2025-26, reflecting substantial demand for Chinese electronics, machinery, chemicals and industrial components, alongside comparatively limited Indian exports.

Sitharaman cited generic medicines, bovine meat, vegetables, and perishables as products for which India sees export potential but has struggled to secure adequate access. Although India and China do not have a bilateral FTA, the relationship illustrates how sanitary and phytosanitary restrictions, licensing, testing, and product approvals can prevent exporters from reaching buyers even when tariffs are not the main obstacle.

For pharmaceuticals and agricultural goods, regulatory recognition may matter more than a customs-duty reduction. India needs time-bound efforts to resolve market-access disputes, transparent approval procedures, and workable mechanisms for recognising standards and testing.

Manufacturing Costs, Europe’s Regulatory Demands

GTRI also warns that inverted duty structures can weaken domestic manufacturing when raw materials and industrial inputs attract higher duties than finished goods.

The report cites cases in which steel and aluminium face MFN duties of 7.5-10%, while machinery and engineering products made from those materials may enter India duty-free under certain FTAs. Domestic manufacturers can consequently face higher input costs while competing with finished imports that receive preferential treatment.

Such distortions may influence investment decisions. If a company can source materials competitively, manufacture in an FTA partner country, and export finished goods to India at reduced tariffs, the incentive to expand production domestically may weaken. GTRI identifies electronics, chemicals, plastics, consumer goods, and engineering products as potentially exposed sectors.

The answer is not to treat imports as inherently harmful: capital goods and intermediate products can improve productivity and support exports. But tariff schedules need to be reviewed to ensure they do not penalise domestic production unnecessarily.

India’s next agreements will also expose exporters to more demanding regulatory requirements. The India-UK agreement came into force on 15 July 2026, and the India-Oman agreement on 1 June. The India-European Free Trade Association (EFTA) agreement is operational. While negotiations on the India-European Union FTA concluded in January 2026, the agreement must complete the necessary formal steps before implementation.

The European Union’s Carbon Border Adjustment Mechanism (CBAM), which entered its definitive phase in January 2026, applies carbon-related costs to covered imports including steel, aluminium, cement, fertilisers, hydrogen, and electricity. Indian exporters must account for these costs alongside tariff preferences. Environmental reporting and traceability requirements can add further burdens, particularly for smaller firms.

A lower customs duty may offer limited advantage if emissions reporting, certification, and other compliance costs erase the price gain.

Measure Results, Not Agreements

India’s expanding FTA network can diversify export markets, attract investment, and connect domestic firms to global supply chains. But the next phase requires closer monitoring of how each agreement performs.

GTRI recommends tracking preference utilisation, trade balances, and sectoral outcomes. A credible assessment should also examine domestic value addition, investment location and MSME participation, identify tariff structures that raise input costs, and monitor unresolved non-tariff barriers.

That requires trade facilitation extending beyond electronic documentation to practical support on rules of origin, standards, certification, and access to overseas buyers. Competitive logistics, reliable power, affordable finance, and predictable regulation remain essential to supplying foreign markets at scale.

The New Zealand pact offers another opportunity to turn negotiated access into measurable export growth. Its success, however, will depend on actual sales and value created in India, not the proportion of tariff lines covered.

India’s FTA strategy will deliver its full economic value only when more domestic firms use the concessions, compete effectively abroad, and translate export growth into sustained production, investment, and jobs.