India is currently engaging in free trade agreement discussions with various partners, both on a bilateral and regional level, aiming to enhance export-driven domestic manufacturing.
These FTAs encompass a broad range of subjects, including tariff reductions that affect the manufacturing and agricultural sectors, regulations on service trade, digital matters like data localization, intellectual property rights that may influence access to pharmaceuticals, and the promotion, facilitation, and protection of investments.
Over the past five years, India has signed 13 FTAs with different trade partners, including the India-Mauritius Comprehensive Economic Corporation and Partnership Agreement (CECPA), the India-UAE Comprehensive Partnership Agreement (CEPA), which came into effect in May 2022, and the India-Australia Economic Cooperation and Trade Agreement (IndAus ECTA), effective from December 29, 2022.
India is also in the process of actively negotiating FTAs with the UK, Canada, the EU, and Israel.
List of Major Free Trade Agreements.
| India’s Trade Agreements: Grouping, Type of Arrangement, Status | |||
|---|---|---|---|
| Grouping | Number of member countries | Member countries | Type of agreement, stage of implementation |
| Asia-Pacific Trade Agreement (APTA) | 7 | India, Bangladesh, China, South Korea, Sri Lanka, Lao PDR, Mongolia | The preferential regional trade agreement, in effect |
| India ASEAN Trade in Goods Agreement (India-ASEAN TIG) | 11 | Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam, and India | Free trade agreement (FTA), in effect |
| Bangladesh, India, Myanmar, Sri Lanka, Thailand Economic Cooperation (BIMSTEC) | 7 | Bangladesh, India, Myanmar, Sri Lanka, Thailand, Bhutan, and Nepal | FTA, under negotiation |
| Global System of Trade Preferences (GSTP) | 42 | Algeria, Argentina, Bangladesh, Benin, Bolivia, Brazil, Cameroon, Chile, Cuba, the Democratic People’s Republic of Korea, Ecuador, Egypt, Ghana, Guinea, Guyana, India, Indonesia, the Islamic Republic of Iran, Iraq, Libya, Malaysia, Mexico, Morocco, Mozambique, Myanmar, Nicaragua, Nigeria, Pakistan, Peru, Philippines, Republic of Korea, Singapore, Sri Lanka, Sudan, Thailand, Trinidad and Tobago, Tunisia, the United Republic of Tanzania, Venezuela, Vietnam, Zimbabwe, and Mercosur. | PTA, in effect |
| South Asia Free Trade Agreement (SAFTA) | 7 | Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka | FTA, in effect |
| India-Nepal Treaty of Trade | 2 | India, Nepal | Specified duty-free access to the Indian market on a non-reciprocal basis, in effect |
| India Sri Lanka Free Trade Agreement (ISLFTA) | 2 | India, Sri Lanka | FTA, in effect |
| India Mauritius Comprehensive Economic Cooperation and Partnership Agreement (India-Mauritius CECPA) | 2 | India, Mauritius | CECPA, in effect |
| India-Malaysia Comprehensive Economic Cooperation (IMCECA) | 2 | India, Malaysia | CECA, in effect |
| India Singapore CECA | 2 | India, Singapore | CECA, in effect |
| Grouping | Number of member countries | Member countries / participating states | Type of agreement, stage of implementation |
| Japan-India Comprehensive Economic Partnership Agreement (JICEPA) | 2 | India, Japan | CEPA, in effect |
| India Korea CEPA (IKCEPA) | 2 | India, South Korea | CEPA, in effect |
| India EU Broad Based Trade and Investment Agreement (BTIA) | 28 | India and the EU (Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, and Sweden) | FTA, under negotiation |
| India Israel FTA | 2 | India, Israel | FTA, under negotiation |
| India Canada CEPA | 2 | India, Canada | CEPA, under negotiation |
| India Peru FTA | 2 | India, Peru | FTA, under negotiation |
| India Chile PTA | 2 | India, Chile | PTA, under negotiation |
| India New Zealand FTA | 2 | India, New Zealand | FTA, under negotiation |
| India Australia Comprehensive Economic Cooperation Agreement | 2 | India, Australia | ECTA, operational since December 29, 2022 |
| India UK FTA | 2 | India, UK | FTA, under negotiation |
| India UAE Comprehensive Economic Partnership Agreement | 2 | India, UAE | CEPA, operational since May 1, 2022 |
Major Free Trade Agreements
Asia Pacific Trade Agreement
The Asia Pacific Trade Agreement (APTA), also known as the Bangkok Agreement, comprises countries such as Bangladesh, India, Laos, China, Mongolia, South Korea, and Sri Lanka. APTA’s primary goal is to accelerate economic growth among its member nations.
Its trade and investment liberalization initiatives, which encompass goods and services, are designed to enhance trade within the region and bolster economic ties among the participating countries.
India-Japan Comprehensive Economic Partnership Agreement
The India-Japan Comprehensive Economic Partnership Agreement (CEPA) eliminates tariffs on nearly 90 percent of goods traded between the two nations. Industries that have gained from these reduced tariffs include textiles, pharmaceuticals, agricultural products, tea, petrochemical and chemical products, cement, and jewelry.
ASEAN-India Free Trade Area
The establishment of the ASEAN-India Trade Area (AIFTA) facilitated the formation of one of the world’s largest free trade markets, benefiting more than 1.9 billion individuals across ASEAN and India, with a combined GDP of $4.8 trillion. This agreement initiated tariff reductions on over 90 percent of products, including palm oil, pepper, black tea, and coffee.
India-Australia CEPA
Australia ratified the India-Australia Economic Cooperation and Trade Agreement (ECTA) on November 22. This agreement will eliminate tariffs on all goods from Australia, covering 6,000 broad sectors. India will remove tariffs on 90 percent of Australian exports, including meat, wool, cotton, seafood, nuts, and avocados.
Both countries will benefit from increased trade, market access, and easier movement of people. The agreement is expected to create around one million jobs by boosting industries such as textiles, agriculture, leather, machinery, and more.
Did you know?
Australia will grant zero-duty access to India for approximately 96.4 percent of its exports by value. Currently, many of these goods are subject to a 4-5 percent customs duty in Australia.
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India-UAE Comprehensive Partnership Agreement (CEPA)
The India-UAE CEPA will benefit around $26 billion worth of Indian exports currently facing a 5% import duty in the UAE. The UAE will eliminate duties on 97% of its tariff lines, covering 99% of imports from India. This means 90% of India’s exports to the UAE will become duty-free immediately.
Key sectors like gems and jewelry, textiles, leather, and pharmaceuticals will gain immediate zero-duty access. Additionally, the UAE can serve as a hub for sourcing Indian capital goods and intermediates for further export to Africa and Europe. The agreement also includes a unique annex on pharmaceuticals, enabling quicker access to Indian pharmaceutical products with approvals from major regulators.
Effects of Free Trade Agreements
• In 2021-22, the textile industry experienced a 15% increase in exports, reaching $44 billion. During the same period, the pharmaceutical sector’s exports grew by 18%, amounting to $24.6 billion.
• India’s FTAs have played a vital role in driving economic growth. For instance, the country’s merchandise exports increased from $330 billion in 2019-20 to $418 billion in 2021-22, a 27% rise, partly due to these trade agreements.
• FTAs typically offer tariff reductions of 80% to 100% on various goods, enhancing the global competitiveness of Indian products.
• India’s total trade volume grew by 21% in 2021-22, reaching $1.27 trillion, highlighting the role of FTAs in expanding trade.
What is a Free Trade Agreement (FTA)?
A Free Trade Agreement (FTA) is a pact between two or more countries aimed at reducing or eliminating trade barriers like tariffs, import quotas, and export restrictions on goods and services. The primary objective is to foster trade and investment among member countries by creating a more conducive trading environment.
How many countries has India signed FTAs with?
India has entered into 13 Free Trade Agreements (FTAs) and six limited coverage Preferential Trade Agreements (PTAs) with various nations. Key agreements include those with ASEAN, Japan, and South Korea. The FTA with the European Free Trade Association (EFTA), comprising Iceland, Liechtenstein, Norway, and Switzerland, is still in the negotiation phase. These agreements provide preferential trade access to over 50 countries. Additionally, India is in the process of negotiating several more FTAs, which could further increase the number of countries with which it has preferential trade agreements in the future.
What is the impact of FTAs on India’s economy?
FTAs influence India’s economy by:
- Enhancing export and import activities, which stimulates economic growth.
- Providing greater market access, which attracts foreign direct investment.
- Promoting growth in specific sectors such as textiles, IT, and pharmaceuticals by reducing trade barriers.
- Increasing the global competitiveness of Indian businesses.
- Job opportunities in export-driven industries are being created due to expanded trade.
The Future of India’s Free Trade Agreements.
India is in the process of negotiating FTAs with the UK, Canada, and the EU, focusing on sectors such as services, digital trade, and sustainable development. The FTA with the UK alone is projected to boost bilateral trade by $15 billion by 2030. Future agreements are expected to prioritize digital trade, with the digital economy potentially adding $1 trillion to India’s GDP by 2025.
India’s FTA strategies are also being shaped by the shift towards regional supply chains and the influence of geopolitical factors like the US-China trade tensions, ensuring alignment with global trade trends.