Can Historic Trade Deals Elevate India on the Global Stage Despite Ongoing Challenges?

The recent trade agreements signed by India with the European Union and the United States mark a significant shift in the country's trade policy, with the potential to alter its economic landscape. Despite concerns over the terms of these agreements, particularly regarding their asymmetric nature, they signal a move away from India's historically protectionist stance and towards greater integration in global markets. However, experts caution that for these deals to be effective, India must address underlying structural issues that hinder its export potential.

Last updated: 25 October 2023 (BST)

What’s happening now

As of March 2026, India has entered into significant trade agreements with both the European Union (EU) and the United States (US), which are being referred to as the "mother of all trade deals" and the "father of all trade deals," respectively. These agreements represent India's tenth free trade agreement (FTA) since 2014, highlighting a clear pivot towards global trade engagement. Despite this progress, concerns persist regarding the fairness and balance of these deals, particularly the perceived advantages granted to the US. Furthermore, India has commenced discussions for a trade deal with the Gulf Cooperation Council (GCC), which plays a crucial role in accounting for 15% of India's global trade.

Key takeaways

India has signed its 10th free trade agreement since 2014, reflecting a shift from its protectionist past.
The agreements with the EU and US raise concerns about their asymmetric nature, particularly favouring the US.
India's low utilisation rate of FTAs (25%) poses challenges for exporters in leveraging trade benefits.
Structural reforms are necessary for India to compete effectively with countries like Vietnam in the global market.
Future efforts must focus on simplifying trade processes to attract more investment and boost exports.

Timeline: how we got here

The trajectory of India's trade agreements has evolved significantly over recent years:

2014: India begins a new phase of trade negotiations, aiming to diversify its economic partnerships.
2023: India signs FTAs with Australia and the UAE, leading to increased exports.
March 2026: India finalises trade agreements with the EU and the US, marking a historic pivot in trade policy.
March 2026: India initiates discussions for a trade agreement with the GCC, further expanding its trade network.

What’s new vs what’s known

New today/this week

The recent agreements with the EU and the US represent a pivotal moment for India, showcasing its commitment to engaging more deeply with global markets. The announcement of talks with the GCC adds to this momentum, indicating India's strategy to enhance its trade footprint in the Gulf region.

What was already established

Historically, India's trade agreements have seen low utilisation rates, with exporters struggling to fully leverage the benefits due to complex regulations and a lack of understanding of FTA provisions. Between 2017 and 2022, India saw a significant disparity in exports and imports with FTA partners, highlighting the challenges faced by Indian exporters.

Impact for the UK

Consumers and households

While the direct impact on UK consumers from India's trade agreements may not be immediately apparent, increased trade between India and major economies could lead to a more competitive market environment, potentially resulting in lower prices and greater product availability in the long run.

Businesses and jobs

For UK businesses, the expansion of India's trade agreements may provide new opportunities for collaboration and investment. Companies looking to enter the Indian market or expand their presence may find new avenues for growth. However, the complexity of India's trade environment may still pose challenges for foreign businesses.

Policy and regulation

The UK government will be closely monitoring India's trade developments, as changes in trade policy could impact bilateral relations and trade agreements. Future consultations and negotiations may arise as India seeks to bolster its position in global trade, which could have implications for UK exporters and importers alike.

Numbers that matter

31%: Increase in India's exports to FTA partners between 2017 and 2022.
82%: Surge in imports from FTA countries during the same period, indicating an imbalance in trade.
25%: India's utilisation rate of FTAs, significantly lower than the 70%-80% seen in developed economies.
15%: Contribution of the GCC to India's global trade.
10th: The number of FTAs India has signed since 2014, indicating a strategic shift in trade policy.

Definitions and jargon buster

Free Trade Agreement (FTA): A pact between two or more countries to reduce or eliminate trade barriers, such as tariffs and import quotas.
Rules of Origin: Criteria used to determine the national source of a product, which affects tariffs and trade agreements.
Gulf Cooperation Council (GCC): A regional intergovernmental political and economic union consisting of six Middle Eastern countries: Saudi Arabia, Kuwait, the UAE, Qatar, Bahrain, and Oman.

How to think about the next steps

Near term (0–4 weeks)

In the coming weeks, stakeholders will need to assess the implications of the new trade agreements. Businesses should evaluate their strategies for entering or expanding in the Indian market, while exporters must familiarise themselves with the updated requirements under the new FTAs to ensure compliance.

Medium term (1–6 months)

As India begins to implement these agreements, it will be crucial for the government to streamline processes and address the identified barriers to trade. Businesses should stay informed about regulatory changes and adapt their operations accordingly to take advantage of the opportunities presented by the new trade landscape.

Signals to watch

Changes in export figures to FTA partners, indicating the effectiveness of the agreements.
Government announcements regarding trade policy reforms and initiatives to simplify compliance.
Feedback from exporters regarding their experiences with the new Rules of Origin and FTA provisions.

Practical guidance

Do

Stay updated on changes in trade regulations and FTA provisions.
Invest in training for staff to understand and navigate the complexities of FTAs.
Engage with trade associations and government bodies to seek guidance and support.

Don’t

Ignore the importance of compliance with Rules of Origin requirements.
Assume that FTAs will automatically lead to increased exports without addressing logistical issues.
Undervalue the need for market research to understand the competitive landscape.

Checklist

Review current export strategies to align with new trade agreements.
Assess the impact of FTA provisions on pricing and market access.
Ensure systems are in place for accurate documentation and compliance.
Identify potential partners in India to facilitate market entry.
Monitor trade performance metrics regularly to gauge the effectiveness of FTAs.

Risks, caveats, and uncertainties

While the recent trade agreements signal a positive shift for India, several risks and uncertainties remain. The asymmetric nature of the agreements, particularly with the US, raises concerns about fairness and equity in trade relations. Additionally, the complexities surrounding Rules of Origin and compliance requirements may hinder exporters' ability to fully leverage the benefits of these FTAs. Furthermore, India's fragmented approach to manufacturing and trade may slow down its ability to compete with more agile economies like Vietnam or Bangladesh.

Bottom line

The trade agreements signed by India in 2026 represent a crucial step towards greater integration into the global economy. However, for these deals to translate into tangible benefits, India must address its structural challenges, streamline trade processes, and enhance its competitiveness in the global market. Focusing on execution and practical measures will be key to achieving long-term success and meeting ambitious export targets.

FAQs

What is the significance of India's trade agreements with the EU and US?

India's trade agreements with the EU and US mark a historic shift towards greater global engagement, potentially enhancing its export capabilities and trade relationships.

How do Rules of Origin affect Indian exporters?

Rules of Origin require exporters to prove the source of their goods, complicating compliance and potentially hindering the benefits of FTAs if not correctly understood and applied.

What challenges do Indian exporters face with the new FTAs?

Indian exporters face challenges such as high documentation costs, complex compliance requirements, and logistical issues that may prevent them from fully utilising the advantages of the new FTAs.