With the India-Oman agreement taking effect on June 1, India now has 15 FTAs covering 27 countries. 

• However, India’s FTAs face scrutiny due to growing trade deficits, increased imports, and domestic manufacturing strain.

Challenges with FTAs

• Rising Trade Deficit: In FY2025, India recorded a trade deficit of over $50 billion with UAE, Australia, Mauritius and EFTA countries. 
  • India’s average annual trade deficit with ASEAN, Japan and South Korea reached nearly $62 billion in the last three years. 
  • South Asia remains the major exception, where India’s trade surplus expanded from $6.7 billion to $20 billion during the same period.
• Tariff Asymmetry: FTA reduces India’s high import duties, making foreign goods cheaper in India, while Indian exports gains little in countries where tariffs were already low.
• Low Utilisation by Indian Exporters: Only 20-30% of eligible Indian exports use FTA preferences because compliance costs often outweigh tariff benefits.
• Inverted Duty Structure: Higher duties on raw materials and lower duties on finished goods increase costs for domestic manufacturers.
• Shift of Manufacturing Abroad: Firms increasingly prefer Make in ASEAN, Sell in India due to cheaper production and duty-free access to Indian markets.