India's new FTA playbook looks beyond trade and tariffs to investment ties

India's recent free trade agreements mark a shift from tariff-led negotiations to deeper economic partnerships, embedding investment commitments, market access and supply chain integration

Free-trade agreements (FTAs) signed by India in the post-pandemic era reflect a shift from tariff-focused deals to an alignment with a changing world order. 

These agreements have weaved in new elements such as binding investment commitments from the FTA partners, provision for social security arrangements and progressively opening up the government procurement market to foreign firms. 

In a first, New Delhi also agreed to lower tariffs and grant market access for automobiles in the FTA with the UK. This is a sector that has been long considered “sensitive” due to its potential to impact jobs in India. Similarly, while India continues to fiercely protect another sensitive sector — agriculture — it has, in some recent trade agreements, offered quota-based market access to fruit and dry fruit — a step it had never attempted in the past. 

Broad architecture 

Government officials said the recently concluded trade agreements and the ongoing negotiations for FTAs indicate a recalibration in the way India is engaging with the world. These trade deals aim not only to deepen economic ties with India’s strategic allies, but also to position the country in shaping modern trade frameworks and integrate them into global supply chains. 

India has been on an FTA-signing spree of late. Since 2021, it has signed seven trade agreements, three of which — with the UK, Oman and New Zealand — were finalised in 2025 alone. A comprehensive trade deal with Mauritius was signed in 2021, followed by pacts with the UAE and Australia a year later. A deal with the four-nation European Free Trade Association (EFTA) was signed in 2024. Currently, India is in active negotiations with the US, EU, Canada, Mexico, Israel, Eurasian Economic Union, Peru and Chile. 

Agneshwar Sen, trade policy leader, EY India said in the newer FTAs signed with developed markets, tariff concessions offer limited preferential market access. Thus, alongside goods and services trade, India is increasingly weaving in new elements such as investment and visa commitments, social security agreements and calibrated access to government procurement. 

Given the increasing impact of these subjects on trade, these provisions will future-proof the agreements, Sen said, by providing greater certainty to investors; reducing the cost of labour mobility for Indian professionals; and integrating Indian firms, particularly micro, small and medium enterprises, into the partner country’s public procurement ecosystem. 

“India is pursuing this broader architecture because global value chains are being reconfigured, and competitiveness today depends as much on investment flows, regulatory predictability and services mobility as on tariffs,” he said. 

Investment pledges  

Nearly two years ago, when India and the four-member EFTA bloc — Switzerland, Norway, Iceland, and Liechtenstein —signed a trade and economic partnership agreement (TEPA), government officials said that apart from the gains for India’s labour-intensive sectors in terms of reduction in tariffs, New Delhi’s major win was investments worth $100 billion. 

Under the deal, which kicked in on October 1, India secured a binding commitment from the four-nation group to invest $100 billion and create 1 million direct jobs over the next 15 years. The deal also says India can partially withdraw market access to EFTA countries after a lengthy consultation if investments do not flow in — another first. 

Similarly, under an FTA finalised in December, New Zealand has committed $20 billion in foreign direct investment (FDI) over the next 15 years. The commitment too will be backed by a ‘rebalancing mechanism’ enabling suspension of benefits under the FTA if expected investments don’t materialise. 

The reason was that average tariffs in any case were low in developed countries — 2.2 per cent in New Zealand for instance. Bringing them down to zero meant the gains for Indian exporters were limited.  

As a result, negotiators in the department of commerce devised a strategy focused solely on FDI, where countries will nudge companies to invest in India. In return, India has to maintain a certain level of nominal economic growth rate.

Experts said there will be greater clarity on these developments in a few years. 

Auto, alcohol, agri 

India has until now protected its domestic automobile and alcohol sectors. But now, under the  insistence of developed countries such as the UK, Australia, New Zealand and EU, India is bound to give access to its large domestic market. Indian negotiators have however, succeeded in ensuring that access is given in a phased manner. 

In the case of the India-UK Comprehensive Economic and Trade Agreement (Ceta), New Delhi for the first time has agreed to reduce tariffs on automobiles, but in a phased manner. Indian negotiators struck a fine balance by protecting small cars while opening up the large car segment to promote competition. Similarly, India allowed duty cuts on another contentious item — alcoholic beverages such as whisky, brandy, rum, vodka, tequila and cider — but again in a phased manner.  

India has also reduced the customs duty on Australian wines, but in a staggered manner to ensure that the domestic wine industry doesn’t end up being subjected to predatory pricing. Even as India continues to fiercely guard its agriculture sector, trade deals with Australia and New Zealand gave quota-based market access for oranges, mandarins, almonds, pears and cotton, among others produce. 

Looking West 

A former trade ministry official said that while India’s earlier “Look East” approach focused on countries that are now competitors, the current emphasis is on looking towards the West — mainly developed nations, where certain demands will have to be accommodated in order to integrate into the global supply chains. 

“India is gradually opening up its markets, keeping in mind the evolving global order. Developed countries are increasingly prioritising issues such as sustainability, labour standards and other New Age concerns,” the official said, adding that India will have to respond, slowly and in a calibrated manner by aligning its policies through small steps. 

For instance, India has been wary of opening government procurement — or tenders — to foreign entities in order to protect domestic producers. However, the first sign of flexibility was seen in the comprehensive economic partnership agreement (Cepa) with the UAE. The biggest relaxation has come in the India-UK Ceta, where New Delhi has committed to give UK businesses access to around 40,000 tenders with a value of at least £38 billion a year. The UK trade deal with has also seen many other new chapters such as telecommunication, innovation, and subsidies. 

By embedding these in FTAs India is aligning its trade policy with its development priorities, while positioning itself as a reliable, long-term economic partner. 

Trading strategy

• India’s modern approach aims to integrate more deeply with western countries

Investment commitments

• EFTA has agreed to invest $100 billion and New Zealand $20 billion over the next 15 years
• India can withdraw market access to EFTA if investments fail to materialise

Social security

• India and the UK have agreed a Double Contributions Convention, so that Indian professionals working in the UK don’t have to pay for social security in both countries

Breaking barriers

• Duty cuts for UK cars, alcohol and Australian wines in phases
• Limited, quota-based access for specific agricultural items
• Government procurement to be opened up, starting with UAE