With the India-Oman agreement taking effect on June 1, India now has 15 FTAs covering 27 countries. Another nine agreements with 42 countries are nearing completion. Once finalised, India’s FTA partners will total 69 countries and could account for nearly 75 per cent of the country’s exports.

As India expands its network of FTAs, four recurring challenges demand attention: Rising trade deficits, low utilisation of FTA benefits by Indian exporters, worsening inverted duty structures, and the relocation of manufacturing to FTA partner countries.

Let’s examine how these challenges are shaping India’s trade patterns, industrial competitiveness, and economic outcomes.

First, a rising trade deficit. Between 2007-09 (before the FTAs took effect) and 202-25, India’s trade deficit with ASEAN grew by 381 per cent, that with Japan by 318 per cent and that with South Korea by 268 per cent. In comparison, its trade deficit with the rest of the world increased by 142 per cent. Over the past three years, India’s average annual trade deficit with ASEAN, Japan and South Korea has reached about $62 billion.

The newer FTAs are also associated with large trade deficits. In FY2025, India exported $48.6 billion to the UAE, Australia, Mauritius and EFTA countries, but imported nearly $100 billion, resulting in a trade deficit of over $50 billion. As tariff cuts under these agreements deepen, the deficit may increase further.

South Asia remains the major exception, where India’s trade surplus expanded from $6.7 billion to $20 billion during the same period.

The difference between India’s tariff structure and those of its FTA partners helps explain why imports often grow faster than exports after FTAs. Most of its FTA partners are already open economies with low tariffs. Average MFN tariffs are close to zero in Singapore and below 4 per cent in........

© Indian Express