India’s expanding network of Free Trade Agreements (FTAs) is delivering broader market access but also creating new challenges, including widening trade deficits, limited utilisation by exporters and increasing pressure on domestic policy-making, according to a recent report by the Global Trade Research Initiative (GTRI).

The report notes that FTAs have become a cornerstone of India’s trade strategy. The country currently has 15 operational trade agreements covering 27 nations, while another nine pacts are either under negotiation or awaiting implementation. Collectively, these agreements encompass 69 countries that account for more than three-fourths of India’s exports.

However, GTRI cautions that the benefits of these agreements have not been evenly distributed. Trade deficits with several major FTA partners have grown significantly over the years. Between the pre-FTA period of 2007–09 and 2023–25, India’s trade deficit with ASEAN increased by 381 percent, while deficits with Japan and South Korea rose by 318 percent and 268 percent, respectively.

The report also highlights concerns over newer trade agreements. In FY25, India exported goods worth US$ 48.6 billion to the UAE, Australia, Mauritius and EFTA countries, while imports from these markets approached US$ 100 billion, resulting in a trade deficit exceeding US$ 50 billion.

Another challenge identified is the low utilisation of FTA benefits. According to GTRI, only around 20–30 percent of India’s eligible exports currently claim preferential tariff benefits under trade agreements. Many exporters, particularly MSMEs, often find compliance requirements and documentation burdens outweigh the tariff savings available.

The report further points to the growing issue of inverted duty structures. While raw materials such as steel and aluminium continue to attract import duties, several finished products and machinery items enter India duty-free under FTAs, placing domestic manufacturers at a cost disadvantage compared to imported goods.

Beyond trade flows, GTRI warns that modern trade agreements are increasingly extending into areas traditionally considered domestic policy matters. New-generation FTAs now include provisions related to labour standards, environmental regulations, digital trade, intellectual property rights, government procurement, competition policy, anti-corruption measures, gender issues, MSMEs and data governance.

According to the report, such provisions could gradually reduce India’s policy flexibility by requiring greater alignment of domestic laws and regulatory frameworks with standards promoted by developed economies.

The report also highlights emerging concerns around non-tariff measures. In particular, the European Union’s Carbon Border Adjustment Mechanism (CBAM) and other sustainability-linked regulations could dilute some of the market access benefits secured through trade agreements by creating additional compliance costs for exporters.

To address these challenges, GTRI has recommended the creation of an FTA Impact Monitoring Authority to regularly assess trade outcomes, utilisation levels, sector-specific gains, import surges and the broader implications of FTA commitments on India’s policy space and industrial competitiveness.

As India accelerates negotiations with major economies and regional blocs, the report suggests that a more balanced approach will be required to ensure trade agreements support export growth while safeguarding domestic manufacturing and regulatory autonomy.