Historic trade deals put India on global stage - but challenges remain

BBC World · Feb 18, 2026 · Collected from RSS

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2 hours agoNikhil InamdarAFP via Getty ImagesSectors like gems and jewellery are likely to benefit from trade deals with EU and USFrom a trade perspective, 2026 would probably go down in history books as an epochal year for India.March has not even begun and Delhi has concluded the "mother of all trade deals" with the European Union and also what's now being termed the "father of all trade deals" with the United States - even though grave concerns remain about the asymmetric nature of the interim agreement which, many say, is stacked heavily in favour of the US.Nonetheless, the pact is India's 10th free trade agreement (FTA) since 2014, signalling a sharp pivot from its protectionist stance that previously forced negotiations with several countries to languish for decades.Fresh off the back of these new pacts, India has now also agreed to start talks for a deal with the six-nation Gulf Cooperation Council (GCC) bloc, accounting for 15% of its global trade.While directionally positive, these deals are hardly a silver bullet for faster exports growth and won't substitute for deeper trade reform, say experts."The success of any FTA lies in how it is utilised, and India has historically exhibited a low utilisation rate of only about 25%, in contrast to a level of 70%-80% among developed economies," Sumedha Dasgupta of the Economist Intelligence Unit told the BBC.That's because for many Indian exporters, especially small companies, the burden of paperwork, audit risks and a lack of understanding of FTA provisions often outweigh tariff benefits.Bloomberg via Getty ImagesIndia has historically exhibited a low utilisation rate for its free trade agreementsHistory shows that this has been the case.According to consultancy EY, between 2017 and 2022 India's exports to its FTA partners rose by 31%, while imports from those countries surged by 82% - a gap it described as an "alarming failure" to fully leverage preferential market access.After a government review, however, agreements signed since 2023 with countries such as Australia and the United Arab Emirates have shown stronger export growth, which EY attributes to improved trade infrastructure and faster dispute resolution mechanisms.But much more needs to happen."FTAs create opportunities on paper, but execution breaks down on the ground," said Kiran Kotla, CEO of Dista, a company which helps facilitate exports compliance and documentation for brands.Kotla said the biggest gaps are around the complexity of Rules of Origin requirements, high documentation costs, non-tariff barriers such as testing and labelling rules, and inconsistent customs interpretation."Many exporters technically qualify for lower tariffs but still pay full duties because proving eligibility is slow, risky, or expensive," he added. Rules of Origin - which require exporters to prove that goods are substantially manufactured or value-added in India rather than merely assembled - remain particularly contentious. Under earlier arrangements, the government issued origin certificates. But under the fine print of the deal with EU, exporters must now self-certify, according to the Delhi-based think tank Global Trade and Research Initiative (GTRI).As a result exporters will "now bear the legal and financial risk of getting it wrong", says GTRI's Ajay Srivastava. An incorrect claim can trigger penalties and recoveries and so "the India–EU FTA will pay off only if its Rules of Origin are properly understood and applied".Beyond these complex structural reforms, more fundamental concerns also need to be addressed if India is to compete effectively in US and EU markets with Asian peers such as Vietnam."Competitiveness is won in operations, not treaties. Vietnam's advantage comes from speed, predictability and deep supply-chain integration, not just tariff access," said Kotla. In effect, this means faster logistics, consistent customs clearance, reliable infrastructure and lower transaction costs."Without that, tariff parity alone won't translate into market share gains."Hindustan Times via Getty ImagesThe pact with the US is India's 10th free trade agreement (FTA) since 2014Unlike Vietnam or even Bangladesh, which have followed export-oriented manufacturing, emphasising on export promotion policies and large-scale foreign direct investment, "India's manufacturing push, in comparison, has been fragmented, less urgent and hesitant to expose domestic firms to foreign competition. This needs to change faster", Priyanka Kishore, founder of the Singapore-based Asia Decoded think-tank, told the BBC.The success of Vietnam's strategy is there for everyone to see. Its merchandise exports, which were about a third of India's in 2010, have now almost reached parity, according to World Bank Data, even though gross domestic product (GDP) is only around a tenth of India's.In fact, almost all major Asian exporters, including Malaysia, Bangladesh and Indonesia, have outperformed India in terms of compounded exports growth in the last decade, according to Asia Decoded. While India has worked hard to gain a foothold in hi-tech manufacturing - making iPhone for the likes of Apple - it lags behind the others when it comes to textiles, footwear, furniture and other low value-added goods, which are the more labour intensive."It's unlikely that if Nike is faced with high tariffs in Vietnam, it'll consider India as the best alternative. India's onerous logistic costs, import duties and cumbersome customs regulations, all weigh it down," says Kishore.Now that the FTAs are done and dusted, the focus in Delhi will have to shift towards streamlining these irritants, experts say.It's what will also help India attract more private investment, create jobs and hit its $1tn per year exports target.