"Rising protectionism in major economies calls for a diversified trade strategy." Assess how India's recent FTAs can cushion the effects of U.S. tariff actions.

The U.S. is India's largest export market and takes about 18% of its exports [1]. India–U.S. trade talks have reached a "plateau", and the RBI Governor has warned that more U.S. tariffs would have "some negative impact". He also said that new FTAs and diversification could soften the blow [2]. The cushion is real over the long term but only partial in the short term.

How recent FTAs cushion the shock

• Market diversification: The India–UK CETA gives duty-free access to 99% of India's exports [3]. New Zealand removes duties on 100% of tariff lines [4].
• Deals already working: The EFTA TEPA has been in force since 1 October 2025 [4]. The India–Oman CEPA, in force since 1 June 2026, gives zero duty on 98.08% of Oman's tariff lines, covering 99.38% of India's exports by value [5].
• Labour-intensive sectors: The India–EU FTA removes duties immediately on lines covering 90.7% of India's exports, including textiles, leather, gems and marine products [6]. These are the sectors most exposed to U.S. tariffs.
• Beyond goods: The deals cover services and mobility, and the NZ deal adds an investment commitment of USD 20 billion over 15 years [4].
• Bargaining leverage: Signing several deals at once strengthens India's hand in the U.S. talks [2].

Limits of the cushion

• Scale mismatch: Small economies such as Oman and New Zealand cannot quickly absorb exports diverted from a market the size of the U.S.
• Timing gap: The EU deal has only been concluded, not ratified [6]. The EFTA deal took about 18 months to go from signing to entry into force [4].
• Low use of benefits: Rules-of-origin paperwork stops many MSMEs from claiming the duty cuts. Duty-free coverage on paper does not guarantee that exporters actually use it.
• Sectoral concentration: Shrimp and gem clusters depend heavily on the U.S. The RBI's tools act on the whole economy and cannot target relief to these sectors.
• Import risk: Past FTAs, such as the one with ASEAN, widened India's trade deficit.
• Context: The February 2026 India–U.S. framework already cut tariffs on USD 30.94 billion of exports from 50% to 18% [1]. The current risk is additional tariffs, not a return to the 2025 shock.

In sum, India's FTAs are a strategic hedge, not an immediate shock-absorber. To make the cushion real, India should digitise certificates of origin, help U.S.-dependent sectors find buyers in FTA markets, and publish data on how much FTA benefit exporters actually claim. Rules-based preferential trade, allowed under GATT Article XXIV, can then serve as a durable buffer for Viksit Bharat's export ambitions.