With the conclusion of free trade agreements (FTAs) with Oman and New Zealand in the last fortnight of 2025 and the FTA with the EU in late-January 2026, India marked a period which was by far the most engaging for the country’s trade negotiators. Besides the three recently concluded FTAs, the agreement with the UK was inked, while the implementation of Trade and Economic Partnership Agreement with the European Free Trade Association (EFTA) began during the year. This period also witnessed intense bilateral trade negotiations with India’s largest trade partners, the US. Yet another significant decision was the decision taken at the end of President Putin’s visit to New Delhi in early December 2025 that India and the Eurasian Economic Union would engage in FTA negotiations covering sectors of mutual interest.
Importance of bilateral FTAs considerably increased after President Donald Trump’s second term for two reasons. First, the WTO and with it the multilateral trade rules are in serious jeopardy after Trump scripted his own trade rules. Back in the late-1940s, the global community recognised that predictable rules are essential for global trade and they, therefore, established the rules-based trading system. With the multilateral system in disarray, bilateral trade agreements have emerged as the only option for setting trade rules. India is among the multitude of countries that have negotiated/are negotiating bilateral trade agreements.
A second, and perhaps a more important reason for India to engage in bilateral FTAs, is to diversify its export destinations. Over the past decade, Indian exporters have increasingly been dependent on the US. In 2014-15, the US accounted for less than 14% of India’s exports, but by the first half of 2025 this figure had increased to nearly 23%. With Trump’s tariff war against India unlikely to end soon, diversification of India’s export destinations has become an imperative. Unlike China, which systematically explored markets in every region as a part of its global integration efforts, India has mostly been dependent on larger economies, including those with large concentrations of Indian diaspora. Trump’s affront should be a wake-up call, and initiatives to expand India’s footprint in global markets through the bilateral FTAs should, therefore, be considered as a step in the right direction.
The India-Oman Comprehensive Economic Partnership Agreement (CEPA) offers opportunities for Indian businesses to expand its presence in the partner country. Oman would eliminate tariffs currently levied on 87% of its tariff lines and since 11% of Omani tariff lines already duty free, India’s businesses would enjoy duty free access in 98% of tariff lines. In the services sector, Oman committed to open a several sectors including computer-related services, business and professional services, audio-visual services, research and development, education and health services, benefiting Indian service providers. A key feature of this agreement is the sizeable increase in temporary employment opportunities for Indians in Oman under Mode 4.
India’s CEPA with Oman, its second bilateral trade agreement with a trade partner in the Gulf region after the UAE, may not contribute much to India’s quest to diversify its exports given Oman’s nominal shares in global merchandise imports and global services imports. However, this agreement is significant as it enhances India’s presence in a strategically important region. Importantly, India’s medium-term objective is to forge a comprehensive agreement with the Gulf Cooperation Council, its CEPA with Oman should be seen as an important step towards accomplishing this objective.
The contentious issue of opening India’s dairy market was the main sticking point in its long-drawn FTA negotiations with New Zealand. Though India refused to lower tariffs on dairy products, the India-New Zealand FTA appears to have come through with India accepting two commitments pertaining to this sector. First, India has agreed to implement a dedicated fast-track mechanism to facilitate the import of New Zealand dairy products duty-free for further manufacturing and export. India’s imports would include dairy ingredients, which would open the door for greater collaboration between the FTA partners. New Zealand expects that this would create new opportunities for its exporters in India's supply chains, including into the latter’s growing number of FTA partners. Secondly, India has committed that should it open its dairy market to other countries in the future, it would extend similar treatment to New Zealand dairy industry as well. The latter commitment, in particular, could open a pandora’s box, as both the US and the EU have been demanding that India must agree to lower tariffs on dairy products as a part of its FTAs with both partners.
New Zealand’s commitment to provide duty-free access to all of India’s exports offers significant opportunities. Though India’s newest FTA partner has very low average tariffs (1.9% in 2024), but it also has peak tariffs in several sectors, especially those of India’s export interest. This includes 45% tariff peak on garments and 10% peak tariff on electronic products, chemicals and leather products.
Services trade between India and New Zealand should also expand, following extensive commitments for opening up their respective service sectors. New Zealand has agreed to provide 1,667 three-year temporary employment entry visas annually (capped at a maximum of 5,000 at any point in time) to Indian professionals in skilled occupations. However, this number is less than the average number of total skilled visas New Zealand issues each year.
Described as the “mother of all deals” by the European Commission President Ursula von der Leyen, the India-EU FTA is the most extensive bilateral deal that India has signed thus far, both in terms of the coverage of areas and the extent of market opening. The EU would provide preferential access to Indian exports in 97% of its tariff lines, covering 99.5% in terms of import value. India is likely to benefit through enhanced exports of labour-intensive sectors, including textiles, leather and footwear, sports goods, and jewellery. Several agricultural products like tea, coffee, spices, and fresh vegetables and fruits and processed food products would also enjoy preferential market access.
One the other hand, India has committed to eliminate tariffs on Overall, India is offering 92% of its tariff lines, covering 97.5% of the EU exports. EU’s automobile pharmaceutical, chemicals, iron and steel, and machinery industries would be the likely beneficiaries of India from India’s market opening. India has excluded cereals and dairy products from the FTA, but it has agreed to eliminate its tariffs on a broad range of agricultural products like olive oil, processed food and sheep meat. Tariffs on wines and spirit would also be substantially lowered. Thus, India’s food processing industry would be exposed to import competition from its counterparts in the EU.
Though several Indian industries are projected to gain from increased exports to the EU, they can realise the gains only if they overcome the extensive regulatory barriers. EU maintains high standards in several areas including food safety, and environmental and labour standards. The government and the businesses must work in sync to ensure that the projected benefits from this FTA are fully realised.
(The writer is Former Professor, Jawaharlal Nehru University)