From a trade perspective, 2026 is likely to go down in history as an epochal year for India.
Before March has even begun, Delhi has concluded what officials describe as the “mother of all trade deals” with the European Union, as well as what is now being referred to as the “father of all trade deals” with the United States. This is despite widespread concern over the asymmetric nature of the interim agreement with Washington, which critics argue is heavily skewed in favour of the US.
Even so, the agreement marks India’s 10th free trade agreement (FTA) since 2014, signalling a sharp departure from the protectionist stance that had caused negotiations with several countries to stall for decades.
Building on this momentum, India has also agreed to begin talks with the six-nation Gulf Cooperation Council (GCC), which accounts for about 15% of India’s global trade.
Experts say that while the direction of travel is positive, the deals are far from a silver bullet for faster export growth and cannot replace the need for deeper structural trade reforms.
“The success of any FTA lies in how it is utilised, and India has historically exhibited a low utilisation rate of only about 25%, in contrast to a level of 70%–80% among developed economies,” said Sumedha Dasgupta of the Economist Intelligence Unit.
She explained that for many Indian exporters — particularly small businesses — the burden of paperwork, audit risks and limited understanding of FTA provisions often outweigh the benefits of lower tariffs.
A history of underperformance
Data suggests this challenge is not new.
According to consultancy EY, between 2017 and 2022 India’s exports to its FTA partners rose by 31%, while imports from those same countries surged by 82%. EY described the imbalance as an “alarming failure” to fully leverage preferential market access.
However, following a government review, agreements signed since 2023 with countries including Australia and the United Arab Emirates have shown stronger export growth. EY attributes this improvement to better trade infrastructure and faster dispute resolution mechanisms.
Despite that progress, experts argue much more needs to be done.
“FTAs create opportunities on paper, but execution breaks down on the ground,” said Kiran Kotla, CEO of Dista, a company that helps brands manage export compliance and documentation.
Kotla identified key gaps in the system, including the complexity of Rules of Origin requirements, high documentation costs, non-tariff barriers such as testing and labelling rules, and inconsistent customs interpretation.
“Many exporters technically qualify for lower tariffs but still pay full duties because proving eligibility is slow, risky, or expensive,” he added.
Rules of Origin and rising risks
Rules of Origin — which require exporters to prove that goods are substantially manufactured or value-added in India rather than merely assembled — remain particularly contentious.
Under earlier arrangements, origin certificates were issued by the government. However, under the fine print of the agreement with the EU, exporters must now self-certify, according to the Delhi-based Global Trade and Research Initiative (GTRI).
As a result, exporters will now shoulder the legal and financial risks of making errors, said GTRI founder Ajay Srivastava.
Incorrect claims can trigger penalties and recoveries, meaning that “the India–EU FTA will pay off only if its Rules of Origin are properly understood and applied,” he warned.
Competing with Asia’s export powerhouses
Beyond these procedural hurdles, analysts say India must address more fundamental competitiveness issues if it hopes to match Asian peers such as Vietnam in US and EU markets.
“Competitiveness is won in operations, not treaties. Vietnam’s advantage comes from speed, predictability and deep supply-chain integration, not just tariff access,” Kotla said.
That advantage translates into faster logistics, consistent customs clearance, reliable infrastructure and lower transaction costs.
“Without that, tariff parity alone won’t translate into market share gains.”
Unlike Vietnam or Bangladesh — which have pursued export-oriented manufacturing strategies supported by aggressive export promotion policies and large-scale foreign direct investment — India’s approach has been more hesitant.
“India’s manufacturing push, in comparison, has been fragmented, less urgent and reluctant to expose domestic firms to foreign competition. This needs to change faster,” said Priyanka Kishore, founder of the Singapore-based Asia Decoded think tank.
The results of Vietnam’s strategy are striking. According to World Bank data, Vietnam’s merchandise exports — roughly one-third of India’s in 2010 — have now almost reached parity, even though Vietnam’s GDP is only about one-tenth the size of India’s.
Asia Decoded data shows that nearly all major Asian exporters — including Malaysia, Bangladesh and Indonesia — have outperformed India in compounded export growth over the past decade.
Manufacturing gaps
India has made progress in high-tech manufacturing, producing iPhones for companies such as Apple, but it continues to lag behind competitors in labour-intensive sectors such as textiles, footwear, furniture and other low value-added goods.
“It’s unlikely that if Nike is faced with high tariffs in Vietnam, it will see India as the best alternative,” Kishore said. “India’s onerous logistics costs, import duties and cumbersome customs regulations all weigh it down.”
What comes next
With the free trade agreements now finalised, experts say Delhi’s focus must shift to addressing these structural bottlenecks.
Doing so would help India attract greater private investment, create jobs, and move closer to its ambitious target of $1tn in annual exports.
