Brief Context
Context The Union Minister of Commerce and Industry said that India now enjoys preferential trade access to nearly two-thirds of global trade through a series of free trade agreements. Free Trade Agreement (FTA) FTAs are arrangements between two or more countries or trading blocs that primarily agree to reduce or eliminate customs tariff and non tariff barriers on substantial trade between them. They can cover both goods and services.
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Syllabus: GS3/ Economy
Context
- The Union Minister of Commerce and Industry said that India now enjoys preferential trade access to nearly two-thirds of global trade through a series of free trade agreements.
Free Trade Agreement (FTA)
- FTAs are arrangements between two or more countries or trading blocs that primarily agree to reduce or eliminate customs tariff and non tariff barriers on substantial trade between them.
- They can cover both goods and services. It also addresses issues such as investment, mobility of professionals, and regulatory cooperation.
- India uses different terms to denote the scope and depth of trade agreements.
- CECA/CEPA (Comprehensive Economic Cooperation/Partnership Agreement): Covers goods, services, investment, intellectual property, and regulatory issues.
- ECTA (Economic Cooperation & Trade Agreement)
- TEPA (Trade & Economic Partnership Agreement)
- CETA (Comprehensive Economic and Trade Agreement)
- India has secured preferential tariff access to markets covering roughly 70% of global GDP and trade flows. India now has trade arrangements with 38 high-income economies, many complementary to its export strengths.
Major FTAs signed in recent years
- India–UAE CEPA ( 2022): The pact opened 99% of tariff lines (zero-duty on nearly all consumer and industrial exports) and expanded services and manpower mobility.
- India–Australia ECTA ( 2022): The deal eliminates tariffs on all Australian exports to India and on the entire range of Indian exports.
- India–EFTA TEPA (2024): The Trade and Economic Partnership Agreement (TEPA) with the four EFTA countries (Switzerland, Norway, Iceland, Liechtenstein) was signed in 2024 and enters force in 2025.
- India–UK CETA (2025): It grants duty-free access to nearly 99% of India’s exports to Britain.
- India–Oman CEPA ( 2025): Oman offered zero-duty on 98.08% of its tariff lines, covering 99.38% of India’s exports to Oman.
- Índia–EU FTA (2026): Under the pact, 97% of EU tariff lines will be covered (about 99.5% of trade value), with India eliminating tariffs on 70.4% of tariff lines at entry.
- The EU agreement alone covers markets responsible for about one-third of global trade.
ftas under negotiation
- Gulf Cooperation Council (GCC): Negotiations formally launched in February 2026 with the Gulf Cooperation Council. The bloc includes Saudi Arabia, UAE, Oman, Qatar, Kuwait, and Bahrain.
- Israel: India and Israel have initiated FTA negotiations, with the first round already held.
- Chile: Terms of Reference signed in 2025 to launch negotiations with Chile.
- Canada: Negotiations with Canada have been revived after earlier disruptions.
Significance of India’s Expanding FTA Network
- Accelerated Export Growth: FTAs reduce or eliminate import duties in partner countries, making Indian goods more price-competitive.
- Integration into Global Value Chains (GVCs): FTAs facilitate participation in cross-border production networks by lowering input costs and simplifying trade rules.
- Indian firms can import intermediate goods at lower tariffs and export finished products competitively.
- Gains Labour-Intensive Sectors: Micro, Small and Medium Enterprises (MSMEs) account for a large share of India’s exports.
- FTAs open new markets for products like handicrafts, textiles, leather goods, processed food, and light engineering items.
- Attraction of Foreign Direct Investment (FDI): FTAs improve investor confidence by ensuring stable market access and predictable trade rules.
- Companies invest in India to use it as an export base to partner countries, facilitating technology transfer, skill development, and capital inflows.
Concerns with FTAs
- Risk of Trade Imbalances: Past FTAs have, in some cases, led to imports rising faster than exports, widening the trade deficit.
- For instance, India’s trade deficit with ASEAN expanded significantly after tariff reductions under the 2010 Goods Agreement.
- Competitive Pressure on Domestic Industries: Domestic industries often fear being outcompeted by cheaper or technologically superior foreign goods.
- Sectors such as dairy, agriculture, automobiles, steel, and electronics are particularly sensitive in FTA negotiations.
Way Ahead
- India’s expanding FTA network marks a decisive shift toward deeper global economic integration. By securing preferential access to markets, India is positioning itself as a major export hub and supply-chain partner.
- If complemented by domestic reforms and industry preparedness, these agreements can significantly advance India’s goal of becoming a leading global trading power and achieving a trillion-dollar export economy.
Source: DD News