India’s trade deficit with key free trade agreement (FTA) partners—including ASEAN, Japan, and South Korea—has widened sharply, with the three blocs now accounting for nearly 37% of the country’s overall trade deficit, according to a recent government analysis.
The deficit with ASEAN alone jumped to $45.2 billion in FY25, up from $25.8 billion just three years ago. This widening gap underscores concerns over India’s ability to leverage its trade agreements for mutual benefit.
Mixed Results from Newer FTAs
India’s newer FTAs with Australia and the UAE have shown mixed results. While the trade deficit with Australia has narrowed, it remains a concern. In contrast, trade with the UAE has seen an uptick in utilization, and India continues to maintain a modest trade surplus with Mauritius.
Encouragingly, more Indian businesses are making use of these newer trade agreements. Certificate of origin usage—a proxy for FTA utilization—rose by 24.7% for the UAE and 19% for Australia, suggesting growing awareness and adoption among exporters.
Underutilization of Major FTAs
Despite longstanding FTAs with Japan, South Korea, and ASEAN, India’s usage of these agreements remains low. Government data shows that utilization rates are languishing between 4% and 25%, indicating significant untapped potential.
Experts believe improved awareness, streamlined customs procedures, and sector-specific support could help Indian exporters make better use of these FTAs, potentially narrowing the growing trade gaps.
As India looks to expand its global trade footprint, effectively utilizing existing FTAs could play a crucial role in boosting exports and correcting imbalances.
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