India's Free Trade Agreements with Asian economies have often widened rather than narrowed trade deficits. Critically examine why FTAs have not delivered the expected export/GVC gains.

Q. India's Free Trade Agreements with Asian economies have often widened rather than narrowed trade deficits. Critically examine why FTAs have not delivered the expected export/GVC gains. (15 marks, 250-350 words)

India has 13 Regional Trade Agreements in force [1], yet its pacts with ASEAN, South Korea and Japan have coincided with widening bilateral deficits. The gap lies less in the agreements themselves than in domestic competitiveness and asymmetric liberalisation.

Why the export/GVC gains fell short - Asymmetric tariff liberalisation: the ongoing AITIGA review explicitly targets "inequitable tariff liberalisation" by partners and injury to Indian industry [2] — partners' non-tariff barriers blunted India's market access while India's tariff cuts were fully used. - Low FTA utilisation by exporters: stringent rules of origin and compliance costs deter use of concessions; CAROTAR, 2020 (in force 21 Sep 2020) was framed to curb FTA misuse and requires importers to prove originating criteria [3], adding paperwork on both flows. - Weak manufacturing base: without depth in electronics, chemicals and machinery, tariff cuts triggered import surges rather than reciprocal exports; the PLI scheme was launched precisely to deepen localisation and GVC integration [4]. - Services strength unmatched by goods: India's comparative advantage lies in services, but early Asian FTAs were goods-first, so gains were structurally capped. - Trade diversion and routing: liberal origin norms let third-country goods enter through FTA partners, inflating imports without value addition in India.

The counter-view — FTAs are not the sole culprit - Deficits also reflect India's import dependence on capital goods and intermediates, which rises with growth irrespective of FTAs. - Institutionally, every FTA carries a Joint Review Mechanism, and India has actively used it — ten AITIGA Joint Committee meetings held [2]. - The new-generation pacts show learning: India–EFTA TEPA (in force 1 Oct 2025) binds partners to a USD 100 billion FDI commitment over 15 years [5], and India–UK CETA plus the India–EU FTA concluded in 2026 lock in developed-market access [6].

FTAs are enablers, not substitutes for competitiveness. The way forward is to pair market access with domestic scale — timely conclusion of the AITIGA review, tighter origin verification, PLI-backed capacity, and services-and-investment-rich agreements — so that trade openness advances the constitutional goal of equitable economic development rather than mere import liberalisation.

(~330 words)

Sources: 1. India has signed 13 Regional Trade Agreements (RTAs)/Free Trade Agreements (FTAs) with various countries/regions — PIB — number of RTAs/FTAs in force 2. India hosts 10th Meeting of AITIGA Joint Committee to review ASEAN–India Trade in Goods Agreement — PIB — AITIGA review objectives (asymmetry, inequitable liberalisation, industry injury); Joint Review Mechanism in practice 3. Implementation of the Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 w.e.f. 21 September 2020 — PIB — rules-of-origin compliance burden and FTA misuse 4. Production Linked Incentive Scheme Strengthens India's Manufacturing Capacity and Export Performance — PIB — PLI aimed at localisation and GVC integration 5. India-EFTA Trade and Economic Partnership Agreement (TEPA) to come into effect on 01 October 2025 — PIB — TEPA entry into force; USD 100 bn FDI commitment over 15 years 6. India–EU Free Trade Agreement Concluded: A Strategic Breakthrough in India's Global Trade Engagement — PIB — India–UK CETA (July 2025) and India–EU FTA (2026)