New Delhi: India’s expanding network of Free Trade Agreements (FTAs) is delivering mixed results, with growing trade deficits, low utilisation rates, and emerging regulatory challenges prompting calls for stronger oversight of the country’s trade policy framework.
According to a new report released by the Global Trade Research Initiative (GTRI), India’s aggressive pursuit of bilateral and regional trade agreements has created several structural concerns that require immediate policy attention. The report recommends the establishment of a dedicated FTA Impact Monitoring Authority to continuously evaluate the economic impact of existing and future trade agreements.
The research body noted that India’s trade deficits have increased with many of its FTA partners, both old and new, raising questions about the effectiveness of some agreements in boosting domestic manufacturing and exports. While FTAs are designed to improve market access and enhance trade flows, the report suggests that imports from partner countries have often grown faster than exports, resulting in widening trade imbalances.GTRI also highlighted concerns regarding inverted duty structures, where lower import duties on finished products compared to raw materials and intermediate goods can weaken the competitiveness of domestic manufacturers. Such distortions, it said, can discourage local value addition and increase dependence on imports.
Another major issue identified in the report is the low utilisation rate of FTAs by Indian exporters. Despite preferential tariff benefits available under many agreements, a significant number of businesses are reportedly not fully leveraging these opportunities due to compliance complexities, documentation requirements, and limited awareness.The report further warned of a gradual shift of manufacturing activities to FTA partner countries, as companies seek to take advantage of more favourable trade conditions and production incentives available elsewhere. This trend could potentially impact India’s manufacturing ambitions and employment generation objectives.
In addition, GTRI pointed to the inclusion of increasingly sophisticated provisions in modern trade agreements that may influence domestic regulations and reduce policy flexibility. Such provisions can affect areas ranging from industrial policy to environmental standards and digital trade regulations.A key concern highlighted by the report is the European Union’s Carbon Border Adjustment Mechanism (CBAM), which is expected to impose carbon-related costs on imports into the EU. GTRI cautioned that such regulatory measures could significantly dilute the benefits of tariff concessions that India may secure through its ongoing trade negotiations with the European Union.
The EU remains one of India’s largest trading partners, and the proposed India-EU trade agreement is widely viewed as a strategic opportunity for expanding exports. However, the report argues that non-tariff measures such as CBAM could become substantial barriers for Indian exporters, particularly in carbon-intensive sectors.To address these challenges, GTRI has proposed the creation of an FTA Impact Monitoring Authority tasked with evaluating trade outcomes, identifying sector-specific concerns, measuring utilisation levels, and recommending policy interventions where necessary.
The report concludes that while FTAs remain an important tool for expanding international trade and attracting investment, India must adopt a more data-driven approach to assess their long-term economic impact and ensure that trade agreements support national manufacturing, employment, and export growth objectives.
