India’s FTA puzzle: Why exports aren’t keeping pace with ambitions

Although Indian exporters secured a record 721,000 certificates of origin in 2024-25, up from 685,000 in FY24, per government data, in some key markets exports declined.

A certificate of origin is critical for exporters as it authenticates goods shipped to countries with which India has a free trade agreement (FTA), allowing access to lower tariffs. However, trade experts say more CoOs do not guarantee higher exports, as factors such as competitiveness, non-tariff barriers, and demand conditions play a greater role.

The US’s steep tariffs has also pushed policymakers to overhaul India’s export promotion strategy to focus on FTA partners and create a cushion against potential losses from conventional markets. At 50%, India faces the highest tariffs among the US’s trading partners, putting India’s exports worth $86.5 billion at risk.

To mitigate the impact, the government is planning closer engagement with key trade partners, awareness programmes for exporters, and a sharper focus on resolving procedural hurdles that prevent shipments from enjoying preferential access under FTAs, said three officials involved in the process, speaking on condition of anonymity.

“Our objective is to make sure every certificate of origin issued under an FTA translates into real trade. We are working on a comprehensive approach to lift exports to these markets over the coming years," one of them said.

The second official said the government has set a target to double exports to India’s FTA partners and is “working on multiple fronts to make the export of goods seamless".

A preliminary assessment by the department of commerce showed significant export potential across all FTA partners in key sectors such as textiles, gems and jewellery, pharmaceuticals, leather, agricultural goods, marine products, chemicals, and plastics, the officials said.

“Dedicated officers will be deployed in missions to identify market opportunities for different categories of products and facilitate exporters in realizing the benefits of CoOs with FTA partners," the third official said.

“The new strategy will also include reviewing sectoral bottlenecks and pursuing market access issues more actively with partner countries, particularly where non-tariff barriers continue to blunt India’s advantage," this official added.

The ministries of commerce and external affairs did not reply to emailed queries.

A trade mismatch

The Asean bloc (Association of Southeast Asian Nations) accounted for the largest share of certificates of origin issued to Indian exporters in FY25—179,000, up from 165,000 in FY24. But India’s exports to Asean in FY25 fell 5.5% to $38.96 billion, commerce ministry data show.

While overall merchandise exports in FY25 remained nearly flat at $433.56 billion, up just 0.11% from $433.09 billion in FY24, the trend varied across India’s FTA partners.

Exports to the UAE rose 2.9% to $36.64 billion, and to Australia by 8% to $8.58 billion, corresponding with an increase in certificates or origin obtained for these nations—122,000 from 98,000 for the UAE, and 77,231 from 64,864 for Australia.

However, shipments to South Korea declined 9.3% to $5.82 billion, and to Mauritius by 13.1% to $676.34 million.

“We are seeing a mismatch at present as the commerce ministry is largely relying on data from importing countries. The question is, why would exporters apply for CoOs and not actually use them?," said Ajay Sahai, director general of the Federation of Indian Export Organisations.

“In our discussions with the ministry, we agree that India is not exploiting FTAs as effectively as partner countries have. The target of doubling exports with FTA partners will definitely help increase trade," Sahai said.

Overall, India’s merchandise exports in August fell to $35.10 billion from $37.24 billion in July

“FTAs provide the gateway, but exporters need the right product strength, supply chain readiness, and policy support to fully tap them," added Ajay Srivastava, co-founder of think-tank Global Trade Research Initiative and a former Indian Trade Service officer.

India’s global trade ties

India’s negotiations with countries under various FTAs, comprehensive economic partnership agreements (CEPA), and other trade deals are at different stages.

Talks with a US delegation for a highly anticipated bilateral trade agreement amid tariff pressures resumed on 16 September in New Delhi after having completed five rounds of discussions.

In July, India and the United Kingdom signed a landmark free trade agreement, ending years of protracted negotiations. The 13th round of talks with the European Union for a FTA was held on 8-12 September, and will resume on 6-10 October, show commerce ministry data as of 16 September.

The 11th round of negotiations for an ASEAN Trade in Goods Agreement is also scheduled for 6-10 October, and is expected to conclude by the end of the year.

India-Australia CEPA discussions have completed 11 formal rounds, with the latest held in August. The third round of talks for an India-New Zealand FTA is ongoing, from 15-19 September. Negotiations for an economic and technology cooperation agreement with Sri Lanka completed its 14th round in July 2024.

India has also signed South Asian free trade agreements with Nepal, Sri Lanka, Bangladesh, Bhutan, the Maldives, and Afghanistan, the India-Nepal treaty of trade, and the India-Bhutan agreement on trade, commerce and transit. India’s trade deal with Pakistan was suspended in August 2019 following the Pulwama terror attack.

Recent agreements include the India-UAE CEPA, the India-Australia economic cooperation and trade agreement, and the India-European free trade association (EFTA) trade and economic partnership agreement (TEPA).