Regional Trade & FTAs
Regional Trade Agreements
India's bilateral and regional trade agreements — FTAs, CEPAs, PTAs with ASEAN, Japan, Korea, UAE, Australia, EFTA; RCEP withdrawal rationale; SAFTA; and emerging trade architecture including Indo-Pacific Economic Framework.
Key Dates
Bangkok Agreement (now APTA — Asia-Pacific Trade Agreement) signed — India's oldest PTA, includes China, South Korea, Bangladesh, Laos, Sri Lanka
India-Sri Lanka FTA came into effect — India's first bilateral FTA covering goods
SAFTA (South Asian Free Trade Area) signed — implemented from 2006; preferential tariffs among SAARC members
India-Singapore Comprehensive Economic Cooperation Agreement (CECA) signed — India's first comprehensive bilateral trade agreement covering goods, services, and investment
India-ASEAN FTA (goods) came into effect — tariff elimination on 75% of tariff lines with phase-down schedule
India-Japan CEPA came into effect — India's most comprehensive agreement at the time covering goods, services, investment, IPR
India-Korea CEPA operational — reduced tariffs on 85% of Korean goods and 75% of Indian goods over 10 years
India-ASEAN Trade in Services Agreement signed — covers Modes 1-3; Mode 4 remains restricted
India withdrew from RCEP negotiations at Bangkok summit — cited concerns about Chinese imports flooding domestic market
India-UAE CEPA signed (February) — India's first comprehensive FTA in over a decade; effective May 2022
India-Australia ECTA signed (April) — interim deal; came into effect December 29, 2022
India joined Indo-Pacific Economic Framework (IPEF) launched by US — but opted out of trade pillar
India initiated review of AITIGA (India-ASEAN FTA) — seeking to address Rules of Origin concerns and trade deficit
India-EFTA TEPA signed (March) — EFTA committed $100 billion investment over 15 years in exchange for market access
India-UK FTA negotiations entered 15th round — key sticking points: whisky tariff, dairy, Mode 4 visas
Types of Trade Agreements — Hierarchy
Trade agreements vary in depth and scope, forming a hierarchy of economic integration: (1) Preferential Trade Agreement (PTA): Partners give preferential (lower) tariff rates on selected products. Most limited in scope — covers a limited number of product lines. India has PTAs with MERCOSUR (Brazil, Argentina, Uruguay, Paraguay — signed 2004, operational 2009), Chile (2007), and Afghanistan (2003). APTA (Asia-Pacific Trade Agreement, formerly Bangkok Agreement, 1975) is India's oldest PTA — members include China, South Korea, Bangladesh, Sri Lanka, Laos, Mongolia. (2) Free Trade Agreement (FTA): Eliminates tariffs and quotas on substantially all trade between partners (typically 85-90% of tariff lines). Each member maintains its own independent external tariff against non-members (difference from Customs Union). India's FTAs: India-Sri Lanka FTA (2000), India-ASEAN FTA (2010), India-Thailand Early Harvest Scheme (2004). (3) Comprehensive Economic Partnership Agreement (CEPA): FTA plus coverage of investment, services, IPR, competition policy, government procurement, labour, environment. More comprehensive than a simple FTA. India-Japan CEPA (2011), India-Korea CEPA (2010). (4) Comprehensive Economic Cooperation Agreement (CECA): Similar to CEPA. India-Singapore CECA (2005), India-Malaysia CECA (2011). The naming conventions (CEPA vs CECA) are India-specific — internationally, these are all variants of comprehensive FTAs. (5) Economic and Technology Cooperation Agreement: Trade plus technology transfer and investment commitments. India-EFTA TEPA (2024) is unique — includes a legally binding investment commitment of $100 billion. (6) Customs Union: FTA plus common external tariff against non-members. EU is a customs union. India is not part of any customs union. (7) Common Market: Customs Union plus free movement of factors of production (labour, capital). (8) Economic Union: Common Market plus harmonised economic policies (monetary, fiscal). Eurozone approaches this. India's current FTA strategy emphasises bilateral CEPAs with key partners (Look East, Act East in trade policy) rather than large plurilateral agreements (after RCEP experience). India currently has 13 operational trade agreements and 7+ under negotiation.
India-ASEAN FTA — Trade & Review
India-ASEAN Trade in Goods Agreement (AITIGA) came into effect on January 1, 2010 after negotiations that began in 2003. ASEAN-10 members: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam. Coverage: Tariff elimination on approximately 75% of tariff lines with phase-down schedules. Normal Track products: Tariffs reduced to zero by 2013 (ASEAN-6: Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand) and 2018 (CLMV countries: Cambodia, Laos, Myanmar, Vietnam). Sensitive Track: Limited tariff reduction (to 5%). Highly Sensitive List: Products excluded or given minimal concession — India excluded dairy, agriculture, automobiles, petrochemicals from full liberalisation. India-ASEAN Trade in Services Agreement signed in 2014 — covers Mode 1 (cross-border supply), Mode 2 (consumption abroad), Mode 3 (commercial presence). Mode 4 (movement of natural persons) remains restrictive. India-ASEAN bilateral trade: $131 billion (FY24) — ASEAN is India's 4th largest trading partner (after US, China, UAE). India's trade deficit with ASEAN: approximately $25 billion (FY24) — growing deficit is India's principal concern. Imports that surged post-FTA: Palm oil from Indonesia and Malaysia (India is world's largest palm oil importer), electronics from Vietnam and Thailand, rubber, plastics, auto components. Indian exports that benefited: Petroleum products, gems & jewellery, pharmaceuticals, marine products, rice. AITIGA Review: India initiated a comprehensive review of AITIGA in 2023, seeking: (a) Stricter Rules of Origin — Indian industry alleges Chinese goods are routed through ASEAN (particularly Vietnam) to avail FTA tariff benefits, undermining the purpose of preferential access. (b) Auto-trigger safeguard mechanisms to protect against import surges in sensitive sectors. (c) Upgrade to include digital trade, sustainability, and supply chain provisions. (d) Rebalancing of tariff concessions — India argues the FTA disproportionately benefited ASEAN exporters. Act East Policy: India's strategic approach to ASEAN encompasses trade, connectivity (India-Myanmar-Thailand Trilateral Highway, Kaladan Multi-Modal Transit Transport Project), defence cooperation, and cultural exchange. India became ASEAN's Comprehensive Strategic Partner in 2022.
RCEP — India's Withdrawal & Strategic Implications
The Regional Comprehensive Economic Partnership (RCEP) is the world's largest FTA by GDP and population — covering 15 Asia-Pacific countries: 10 ASEAN members + China, Japan, South Korea, Australia, New Zealand. Signed in November 2020, effective from January 1, 2022. Covers approximately 30% of world GDP, 30% of world population, and 28% of global trade. India participated in RCEP negotiations for 7 years (2012-2019) but withdrew at the Bangkok summit in November 2019. PM Modi stated: "The RCEP agreement does not reflect its original intent and the core interests of India." India's five key concerns: (1) China trade deficit: India's trade deficit with China was $85 billion in FY24 (largest bilateral deficit). RCEP would have required further tariff reduction on Chinese goods — devastating for domestic manufacturing in sectors like toys (China's share: 85% of India's imports), electronics (65%), chemicals, steel, textiles, furniture. (2) Dairy and agriculture: India is the world's largest milk producer (231 million tonnes in 2023-24) with 80 million dairy farmers, mostly small-holders. RCEP would have exposed them to cheap dairy imports from New Zealand (world's largest dairy exporter per capita) and Australia. Similarly, plantation crops (tea, rubber, spices) feared competition. (3) Rules of Origin: Weak RoO provisions could allow third-country goods (especially Chinese products) to enter India via RCEP partners at preferential rates, defeating the purpose of bilateral tariff elimination. (4) Services inadequacy: RCEP's services chapter was inadequate for India's interests. Mode 4 (movement of professionals) — India's strongest export mode — was not meaningfully liberalised by partners. (5) Auto-trigger safeguards: India demanded automatic safeguard mechanisms if imports surged beyond a threshold — not accepted by other members. Post-withdrawal strategy: India pivoted to bilateral FTAs with select partners — UAE CEPA (2022), Australia ECTA (2022), EFTA TEPA (2024), and ongoing negotiations with UK, EU, GCC. The "China+1" strategy by global firms (diversifying manufacturing away from China) benefits India despite RCEP absence — Production-Linked Incentive (PLI) schemes target this opportunity. India retains an "open door" clause to join RCEP later.
India-UAE CEPA — Landmark Agreement
India-UAE Comprehensive Economic Partnership Agreement: Signed February 18, 2022 — effective May 1, 2022. This was India's first major FTA in over a decade (after India-Japan/Korea CEPAs in 2010-11) and was negotiated in a record 88 days — unprecedented speed reflecting the strategic partnership between the two countries. Coverage: 97% of tariff lines (99% by value for UAE, 90% for India). Key provisions: Goods: India's key gains: Zero duty on gems & jewellery exports (India's largest export category to UAE, worth $8+ billion), textiles and garments, leather goods, footwear, sports goods, engineering goods, pharmaceuticals, agricultural products (rice, fruits, tea, spices, meat, seafood). UAE's key gains: Zero or reduced duty on petroleum products, gold, chemicals, minerals, plastics, base metals. Services: Mutual recognition of qualifications in select professional services (architecture, nursing, chartered accountancy). Digital trade provisions — first Indian FTA with dedicated digital trade chapter. Government procurement commitments — access for Indian companies to UAE government contracts. Investment: UAE is a major investor in India — cumulative FDI of $18+ billion. CEPA includes investment protection and facilitation framework. Abu Dhabi Investment Authority (ADIA) is one of the world's largest sovereign wealth funds. Trade impact: India-UAE bilateral trade reached $84.5 billion (FY24) — UAE is India's 3rd largest trading partner (after US, China). India's exports to UAE grew 12%+ in first year post-CEPA. Gems & jewellery, petroleum products, and food products were major export gainers. FTA utilisation rate (proportion of eligible trade that actually uses FTA preferences) is estimated at 35-40% — significantly higher than India's FTA utilisation with ASEAN (25%). India-UAE relations: 3.5+ million Indian diaspora in UAE (largest expatriate community). Remittances from UAE to India: $14+ billion annually. CEPA is part of a broader strategic partnership covering defence, space, climate, digital, and energy cooperation.
India-Australia ECTA & India-EFTA TEPA
India-Australia Economic Cooperation and Trade Agreement (ECTA): Signed April 2, 2022 — effective December 29, 2022. This is an interim agreement — a comprehensive CECA (full FTA covering services, investment, digital) is under negotiation. India offers tariff concessions on 70% of tariff lines (to be increased to 96% eventually over phased timelines). Australia offers zero duty on 100% of Indian goods immediately (Australia already had low tariffs — average applied MFN tariff of 2.5%). India's key gains: Zero duty on textiles and garments (potential $2 billion export gain), gems & jewellery, leather, footwear, furniture, food products. Services: Post-study work visa for Indian students (up to 4 years), STEM work visa provisions, mutual recognition arrangements. IT services market access commitments. Australia's key gains: Tariff reduction on wine (from 150% to 50% over 10 years), almonds, lentils, sheep meat, wool, coal, LNG, aluminium, copper. India excluded dairy products, wheat, rice, sugar, sunflower oil, gold, and several other sensitive items from concessions. Bilateral trade: approximately $27 billion (FY24). Australia is an important source of resources (coal, LNG, gold, uranium) and education services for India. India-EFTA Trade and Economic Partnership Agreement (TEPA): Signed March 10, 2024 — between India and EFTA (Switzerland, Norway, Iceland, Liechtenstein). Most innovative feature: EFTA committed to facilitating $100 billion in investment in India over 15 years — the first time any FTA included a legally binding investment commitment with consequences. If EFTA fails to achieve the $100 billion target, India can suspend tariff concessions — a "snap-back" provision. This creates a direct link between market access and FDI commitment. India's key concessions: Reduced tariffs on Swiss watches (from 20-25% to lower rates over 10 years), Norwegian fish and seafood, gold, processed food, machinery, precision instruments. India excluded dairy, soy, palm oil, and agricultural products from liberalisation. India's gains: Market access for pharmaceutical generics (EFTA countries have strong IP regimes — Switzerland is home to Novartis, Roche, Nestl), IT services, textiles. Investment in manufacturing — EFTA companies (ABB, Nestl, Roche, Equinor, Zurich Insurance) expected to expand manufacturing in India. Strategic significance: Diversifies India's FTA portfolio beyond Asia. Switzerland is the world's 2nd most innovative country (GII 2023). Total EFTA-India trade: modest at $26 billion but potential for growth through investment.
SAFTA & South Asian Trade Integration
South Asian Free Trade Area (SAFTA): Agreement signed in January 2004 at the 12th SAARC Summit in Islamabad, operational from July 2006. Members: India, Pakistan, Bangladesh, Sri Lanka, Nepal, Bhutan, Maldives, Afghanistan (8 SAARC members). SAFTA aims to reduce tariffs to 0-5% on substantially all products within the region. Implementation: Tariff reduction was phased — Non-LDC members (India, Pakistan, Sri Lanka) completed tariff reduction by 2012; LDC members (Bangladesh, Nepal, Bhutan, Maldives, Afghanistan) by 2016. However, large Sensitive Lists have severely limited actual trade liberalisation — India's Sensitive List has 480+ items for LDC members and 868 items for non-LDC members (Pakistan, Sri Lanka). These include products where partner countries have comparative advantage. Pakistan suspended trade with India in August 2019 after the revocation of Article 370 (abrogation of Jammu & Kashmir's special status) — SAFTA benefits suspended bilaterally, MFN status withdrawn by Pakistan. India-Pakistan bilateral trade has dropped to near-zero from $2.5 billion (FY19). Intra-SAARC trade is among the lowest of any regional grouping — approximately 5% of total trade (compared to 25% in ASEAN, 60%+ in EU, 40%+ in NAFTA/USMCA). Structural reasons: (a) India-Pakistan political tensions fundamentally constrain regional integration. (b) Similar export baskets (textiles, agriculture, garments) limit trade complementarity. (c) Poor cross-border connectivity and infrastructure — no direct rail freight between India-Bangladesh until recently. (d) High non-tariff barriers — sanitary/phytosanitary standards, customs procedures, visa restrictions. (e) Informal/illegal trade estimated at 2-3x formal trade (India-Pakistan, India-Bangladesh borders). India's bilateral South Asian agreements: India-Sri Lanka FTA (2000) — India's first bilateral FTA, covers goods only, 4,000+ product lines at zero duty. India-Nepal trade treaty — allows duty-free access for Nepalese goods with domestic value addition of at least 30%. India-Bhutan — virtually free trade, India is Bhutan's largest trading partner and development aid donor. India-Bangladesh: Trade through SAFTA + bilateral MoUs, bilateral trade $16+ billion (FY24) — India grants duty-free access under SAFTA + LDC provisions. Bangladesh is India's largest trading partner in South Asia. BBIN (Bangladesh-Bhutan-India-Nepal) Motor Vehicles Agreement (2015) — aims to improve road connectivity and trade facilitation but implementation has been slow (Bhutan withdrew in 2017, bilateral India-Bangladesh MVA operational). India's Duty-Free Tariff Preference (DFTP) scheme: Extended to all LDCs globally (not just SAFTA members) — covering 98.6% of tariff lines at zero duty. Benefits countries like Bangladesh, Cambodia, Myanmar, Nepal, Ethiopia, Tanzania.
India-Japan CEPA & India-Korea CEPA
India-Japan Comprehensive Economic Partnership Agreement: Signed February 16, 2011 — came into effect August 1, 2011. At the time, it was India's most comprehensive bilateral trade agreement. Coverage: 94% of Japan's tariff lines and 90% of India's tariff lines to reach zero/reduced tariffs over 15 years. India's gains: Market access for agricultural products (shrimp, tuna, mango, spices), pharmaceuticals, textiles, chemicals, iron ore. Services: Recognition of Indian IT professionals' qualifications, Mode 4 provisions for movement of business persons. Investment chapter with investor protection. Japan's gains: Reduced tariffs on automobiles (from 100%+ to 60-70% over 10 years — still high protection for India's auto industry), auto parts, electronic goods, steel, machinery, chemicals. Japan-India Special Strategic and Global Partnership: Bilateral trade: $22 billion (FY24). Japan is the 5th largest source of FDI in India ($38 billion cumulative). Japanese companies in India: Suzuki (Maruti), Toyota, Honda, Sony, Panasonic, Mitsubishi. JICA (Japan International Cooperation Agency) is the largest bilateral development finance provider to India — funding Delhi Metro, Mumbai Trans-Harbour Link, DFC, Chennai Metro, and numerous infrastructure projects. Indian workers in Japan growing through Specified Skilled Worker (SSW) visa programme. India-Korea Comprehensive Economic Partnership Agreement: Signed August 7, 2009 — effective January 1, 2010. Coverage: Korea eliminated tariffs on 85% of tariff lines; India on 75% over 10 years. Bilateral trade: $25 billion (FY24). India's trade deficit with Korea: approximately $10 billion — one of the concerns with the CEPA. Korean FDI in India: $8 billion cumulative. Major Korean companies in India: Samsung (largest FDI from Korea), Hyundai, LG, Kia, POSCO. Steel and electronics are major imports from Korea. India has initiated a review of the Korea CEPA to address the trade deficit — seeking to expand Indian exports of agricultural products, textiles, and IT services. Both the Japan and Korea CEPAs demonstrate a pattern: India's trade deficit with FTA partners has generally increased post-agreement, primarily because partner countries' manufactured goods are more competitive. This has made India cautious about new FTAs and is a key reason behind RCEP withdrawal.
Indo-Pacific Economic Framework & New Trade Architecture
The global trade architecture is shifting from WTO-centric multilateralism to plurilateral and regional frameworks. India is navigating this shift selectively. Indo-Pacific Economic Framework (IPEF): Launched by the United States in May 2022 in Tokyo. 14 members: US, India, Japan, Australia, South Korea, New Zealand, Indonesia, Thailand, Vietnam, Philippines, Singapore, Malaysia, Brunei, Fiji. Four pillars: (I) Trade — fair and resilient trade, labour standards, environmental provisions, digital trade rules, agriculture, regulatory transparency. India opted OUT of Pillar I citing: labour/environmental standards could become non-tariff barriers, digital trade rules could restrict India's data localisation policies, and agricultural provisions might constrain India's MSP/procurement programmes. (II) Supply Chains — diversification, early warning mechanisms, critical minerals mapping, crisis response. India is actively participating. Supply Chain Resilience Agreement signed in 2023 — establishes Crisis Response Network and Supply Chain Council to coordinate during disruptions. (III) Clean Economy — clean energy transition, decarbonisation, climate-smart agriculture, greenhouse gas emissions reduction. India participates — aligned with India's climate commitments and green hydrogen ambitions. (IV) Fair Economy — anti-corruption, tax transparency, capacity building, anti-money laundering. India participates. Key point: IPEF is NOT an FTA — there is no tariff reduction or market access commitment. It is a framework for standards, norms, and cooperation. This makes it less threatening to domestic industry but also less impactful in terms of trade creation. India-Middle East-Europe Economic Corridor (IMEC): Announced at the G20 New Delhi Summit (September 2023). Two corridors: Eastern Corridor (India → UAE → Saudi Arabia) and Northern Corridor (Saudi Arabia → Jordan → Israel → Europe). Rail and shipping connectivity — alternative to China's Belt and Road Initiative (BRI). Includes electricity cable, hydrogen pipeline, and high-speed data cable. Still in planning stage — geopolitical challenges (Israel-Palestine conflict) may delay implementation. I2U2 (India-Israel-UAE-US): Minilateral for economic cooperation — food security (joint food parks in India), clean energy (hybrid renewable projects in Gujarat), health/space technology. BRICS: India is a founding member (2009). BRICS expanded in 2024 to include UAE, Saudi Arabia, Egypt, Ethiopia, Iran. New Development Bank (NDB, HQ Shanghai) provides infrastructure financing — India's contribution $10 billion, cumulative lending $33+ billion. BRICS Cross-Border Payments Initiative under discussion as alternative to SWIFT. SCO (Shanghai Cooperation Organisation): India joined in 2017. Trade facilitation and connectivity cooperation, though dominated by China-Russia dynamics.
India-UK & India-EU FTA Negotiations
India-UK FTA: Negotiations launched January 13, 2022 — the first major FTA negotiation between India and a G7 country. By 2024, 14+ rounds completed with significant progress but several sticky issues remain. UK's key demands: (a) Whisky and spirits: India charges 150% customs duty — UK wants significant reduction (India's largest scotch market globally). (b) Automobiles: UK wants reduced tariffs on luxury cars (currently 60-100%). (c) Dairy products: Access for UK cheese, cream, milk products. (d) Insurance and financial services: Higher FDI limits, regulatory access. (e) Legal services: UK law firms seeking to practice in India. India's key demands: (a) Mode 4 liberalisation: Easier work visas for Indian professionals in IT, healthcare, engineering, and education. (b) Social security agreement: Portability of pension contributions for Indian workers in UK. (c) Professional qualifications: Mutual recognition of Indian degrees and certifications. (d) Services market access: IT, BPO, and professional services. (e) Reduced non-tariff barriers: Sanitary/phytosanitary standards on Indian agricultural exports. Bilateral trade: $22 billion (FY24). UK is among the top 5 sources of FDI in India. 1.6 million Indian-origin people in UK. Timeline: Expected completion by 2025 if political conditions remain favourable. India-EU FTA (Broad-based Trade and Investment Agreement — BTIA): Original negotiations launched in 2007, suspended in 2013 after 16 rounds due to disagreements on tariff levels, data protection, and services. Restarted in 2022 after a 9-year gap. EU is India's 2nd largest trading partner ($120+ billion bilateral trade, FY24). Key EU demands: Data adequacy recognition (EU GDPR compliance), government procurement access, GI (Geographical Indication) recognition for European products (Champagne, Parmesan, Feta), IPR standards. India's demands: Services liberalisation (Mode 1 and Mode 4), removal of EU non-tariff barriers (EU Carbon Border Adjustment Mechanism — CBAM — could affect Indian steel, cement, aluminium, fertiliser exports), reduced sanitary/phytosanitary barriers for Indian food exports. CBAM: EU's carbon border tax (transitional from 2023, full from 2026) will impose tariffs on imports based on carbon content — could cost Indian exporters $2+ billion annually. India has called CBAM "discriminatory" at WTO. India-GCC FTA: Under negotiation. GCC (Saudi Arabia, UAE, Qatar, Bahrain, Kuwait, Oman) is India's largest regional trading partner ($188 billion bilateral trade, FY24). India is already a major market for GCC petroleum — FTA aims to formalise deeper integration beyond the India-UAE CEPA. India imports approximately 40% of its crude oil from GCC countries.
FTA Utilisation, Trade Deficit & Policy Debates
A critical issue with India's FTAs is the gap between theoretical benefits and actual outcomes: FTA Utilisation Rate: The proportion of eligible trade that actually uses preferential FTA tariff rates. India's FTA utilisation is estimated at 25-30% on average — significantly lower than the 70-80% utilisation by ASEAN countries, South Korea, and Japan. Reasons for low utilisation: (a) Complex Rules of Origin documentation requirements deter small exporters. (b) Lack of awareness among SMEs about FTA benefits. (c) Compliance costs sometimes exceed tariff savings for small shipments. (d) Domestic value addition requirements are difficult for firms in global supply chains. The Government has initiated FTA awareness campaigns and digital platforms for certificate of origin issuance. Trade Deficit Widening: India has experienced widening trade deficits with most FTA partners post-agreement: India-ASEAN deficit grew from $7 billion (FY10) to $25 billion (FY24). India-Korea deficit: $10 billion (FY24). India-Japan trade is relatively balanced. The concern: Partner countries' manufactured goods are more competitive, and tariff reduction enables increased imports. India's exports (agricultural, textile, services) face non-tariff barriers in partner countries even when tariffs are reduced. This experience has made India cautious about ambitious tariff liberalisation in new FTAs. Rules of Origin (RoO) Concerns: RoO determine whether a product qualifies for preferential tariff treatment. Types: (a) Wholly obtained — products entirely produced in the FTA partner country. (b) Change in tariff classification — product undergoes substantial transformation. (c) Value addition — minimum percentage of value must be added in the partner country (typically 35-40%). India's concern: Chinese goods are routed through ASEAN partners (trans-shipment/re-export) with minimal value addition, entering India at preferential FTA rates. This is alleged particularly for electronics, chemicals, and textiles via Vietnam, Thailand, and Malaysia. India has proposed strengthening RoO verification mechanisms in the AITIGA review. Comparative FTA strategy: India's approach contrasts with countries like Vietnam (16 FTAs), South Korea (22 FTAs), Singapore (27 FTAs), Chile (30+ FTAs). These countries have used FTAs to integrate into global supply chains and attract manufacturing investment. India's caution is partly justified (protecting domestic industry) but may limit India's participation in global value chains.
BIMSTEC & Sub-Regional Trade Cooperation
BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation): Established in 1997. Members: India, Bangladesh, Myanmar, Sri Lanka, Thailand, Nepal, Bhutan (7 countries). BIMSTEC has gained importance as an alternative to SAARC (which is paralysed by India-Pakistan tensions). India has been promoting BIMSTEC as its preferred regional grouping for South and Southeast Asian cooperation. BIMSTEC FTA: Negotiations began in 2004 but progress has been very slow — framework agreement signed but not yet operational. India has offered zero-duty access to LDC members (Bangladesh, Nepal, Bhutan, Myanmar) under its DFTP scheme. Key advantage of BIMSTEC over SAARC: Excludes Pakistan, includes Thailand and Myanmar — provides a bridge between South and Southeast Asia. Aligns with India's Act East Policy and connectivity projects (Kaladan, IMT Trilateral Highway). PM Modi has emphasised BIMSTEC's importance — BIMSTEC leaders have been invited to key Indian diplomatic events (PM Modi's 2014 inauguration, Republic Day). BIMSTEC covers 14 priority sectors including trade & investment, technology transfer, energy, transport & communication, agriculture, counter-terrorism, environment, and climate change. BIMSTEC Secretariat established in Dhaka (2014). BCIM (Bangladesh-China-India-Myanmar) Economic Corridor: Proposed connectivity and economic corridor. India has been cautious about BCIM as it involves China — preferring to pursue India-Myanmar bilateral connectivity and BIMSTEC framework instead. India-Myanmar-Thailand Trilateral Highway: 1,360 km highway connecting Moreh (Manipur) to Mae Sot (Thailand) via Myanmar. Expected to boost trade and connectivity with mainland Southeast Asia. Part of India's Act East Policy infrastructure. Sections in Myanmar are being upgraded. Kaladan Multi-Modal Transit Transport Project: Connects Kolkata port to Sittwe port (Myanmar) and then through river/road to Mizoram. Gives India's northeast states an alternative access route to the sea. Phase 1 (waterway) is operational. These connectivity projects aim to increase India's trade with Southeast Asia through land routes — complementing maritime trade and reducing dependence on the Malacca Strait.
Trade Remedies & Anti-Dumping Measures
Trade remedies are tools used by countries to protect domestic industries from unfair trade practices. India is among the most active users of trade remedies globally. Anti-Dumping Duties (ADD): Imposed when a foreign producer sells goods in India at below their domestic market price or below cost of production, causing material injury to Indian industry. India imposed 262 anti-dumping measures in force (2023) — 2nd most globally after USA. DGTR (Directorate General of Trade Remedies) under Department of Commerce investigates dumping complaints. Major targets: China (50%+ of India's ADD cases), EU, South Korea, Thailand, Malaysia. Products frequently targeted: chemicals, steel, textiles, ceramics, rubber, optical fibre, aluminium. Process: Indian industry files petition → DGTR investigation (12-18 months) → Provisional duty → Final determination → Duty imposed for 5 years (renewable). Countervailing Duties (CVD): Imposed when foreign governments subsidise their exporters, causing injury to Indian industry. Less frequently used than ADD. Safeguard Duties: Temporary measures when imports surge suddenly and cause serious injury to domestic industry — applied to all sources (not country-specific). India imposed safeguard duty on solar cell imports (2018-2022) to protect domestic solar manufacturers. WTO-compliant: India's trade remedies are WTO-compliant as long as proper investigation procedures are followed. Some trading partners have challenged India's ADD at WTO — India has both won and lost cases. India has also faced anti-dumping investigations in other countries — US and EU have imposed ADD on Indian steel, shrimp, pharmaceutical ingredients, and textiles. Quality Control Orders (QCOs): India has introduced mandatory quality standards (BIS certification) for 600+ products — electronic goods, toys, steel, chemicals, food products. While technically for quality assurance, trading partners (China, EU) view some QCOs as non-tariff barriers designed to restrict imports. India argues QCOs protect consumer safety.
Trade Agreements & Constitutional Framework
Constitutional and legal framework for India's trade policy: Article 246 read with Entry 83 of Union List (List I, Schedule VII): "Duties of customs including export duties" — foreign trade is an exclusive Union subject. Entry 41 of Union List: "Trade and commerce with foreign countries." Article 253: Parliament can legislate on international agreements — implementation of trade treaties requires parliamentary legislation for any domestic law change (tariff modifications, IP law amendments). Foreign Trade (Development and Regulation) Act 1992 (FTDR Act): Principal legislation governing foreign trade. DGFT (Directorate General of Foreign Trade) under Department of Commerce administers the Act. DGFT issues Foreign Trade Policy (FTP) every 5 years — current FTP 2023 (indefinite, "dynamic and responsive"). FTP provides for export promotion schemes: Advance Authorisation, DFIA (Duty Free Import Authorisation), EPCG (Export Promotion Capital Goods), RoDTEP (Remission of Duties and Taxes on Exported Products — replaced MEIS and GST refund mechanisms). Customs Act 1962: Provides for imposition of customs duties, anti-dumping duties, safeguard duties. Customs Tariff Act 1975: Specifies tariff rates — basic customs duty schedules aligned with Harmonised System of Nomenclature (HSN). Tariff Commission (1997): Advisory body on tariff policy. All India Rubber Industries Association and similar industry bodies frequently petition for tariff protection. India's applied MFN tariff: Average 18.1% (simple average, 2022) — among the highest for major economies (US: 3.4%, EU: 5.1%, China: 7.5%, Japan: 4.2%). This gives India significant "policy space" to offer tariff concessions in FTAs while still maintaining protection for sensitive sectors.
India's Export Strategy & Trade Infrastructure
India's export policy framework aims to increase goods and services exports to $2 trillion by 2030. Current status: Merchandise exports $437 billion (FY24), Services exports $341 billion (FY24) — total $778 billion. Merchandise trade deficit: $240 billion. Key policy instruments: (1) RoDTEP (Remission of Duties and Taxes on Exported Products): Replaced MEIS (Merchandise Exports from India Scheme) which was ruled WTO-incompatible. RoDTEP reimburses embedded central, state, and local duties/taxes not refunded through GST — implemented through digital scrip system. (2) Production-Linked Incentive (PLI) schemes: Rs 1.97 lakh crore across 14 sectors to boost manufacturing exports — mobile phones (most successful, exports jumped from $3 billion FY20 to $15.6 billion FY24), pharmaceuticals, textiles, food processing. (3) Districts as Export Hubs (DEH): Initiative to identify products with export potential in each district and create district-level export action plans. Mapped products across 739 districts. (4) Trade infrastructure: Sagarmala (port modernisation), PM GatiShakti (multi-modal connectivity), Dedicated Freight Corridors, Free Trade Warehousing Zones (FTWZs), Inland Container Depots (ICDs). One District One Product (ODOP): Selecting and promoting one product from each district for export — integrated with GI registration and quality improvement. Challenges: (a) Non-tariff barriers in destination markets (EU CBAM, US sanitary standards, Japan quality certifications). (b) Currency volatility — strong rupee hurts export competitiveness. (c) High logistics costs (14-16% of GDP vs 8% in developed countries). (d) Limited participation in global value chains — India's share in GVC trade is about 15% (compared to 35-40% for Vietnam, Thailand). (e) Over-dependence on petroleum exports ($90 billion, 20% of total) — vulnerable to commodity price swings.
Relevant Exams
Regional trade agreements are heavily tested in UPSC Prelims and Mains — RCEP withdrawal reasons, India-UAE CEPA features, SAFTA provisions, and IPEF pillars are frequently asked. SSC CGL tests factual knowledge of ASEAN FTA, SAFTA members, and recent FTA signings. IBPS PO asks about bilateral trade figures and FTA impact on specific sectors. UPSC Mains GS Paper 2 (International Relations) and GS Paper 3 (Economy) both test India's trade agreement strategy. Questions on BIMSTEC, IMEC, trade remedies, and FTA utilisation are increasingly common.