Taking the FTA agenda forward in 2026: A strategic roadmap for India

Moving ahead with participation in next-generation FTAs, supplemented by substantive domestic trade policy reforms, must be India's focus

The conclusion of negotiations on the India-European Union (EU) free trade agreement (FTA) is very creditable, given that bilateral talks were ongoing, though intermittently, since 2007. Notwithstanding the fact that the FTA negotiations were accelerated over the last year owing to geopolitical pressures, it must be acknowledged that India has widened the scope of its FTA partners to include both developed and developing countries. Evidence of increased breadth — and, to some extent, depth — of provisions is also apparent in recent FTAs. The FTA with the United Kingdom, in particular, with almost 90 per cent tariff-line liberalisation, the inclusion of environmental and labour standards, and the opening up of select sensitive sectors, albeit under tariff rate quota provisions, is indicative of a positive change in India’s FTA engagement. Reportedly, the just-concluded India-EU trade deal shares these desirable characteristics and high ambition. It is now imperative that India take this trade strategy forward. 

Foremost, the remaining formalities for signing the FTA with the EU should be completed in the next few months. This will ensure that its ratification by the EU parliament, which is usually a year-long process, gets completed within the coming financial year. Speed is desirable as the imperatives for market diversification away from the increasingly uncertain US market remain persistent and strong. 

Secondly, there should be a clear delineation of the task ahead to realise fully the benefits of preferential market access offered by the FTAs signed in recent years. It is necessary to recognise that comparator developing economies like Vietnam have a first-mover advantage in many of these markets. For example, Vietnam’s lead over India in the two countries’ respective shares in Australia’s total apparel imports has widened since 2022, the year when India signed the Economic Cooperation and Trade Agreement with Australia. Continued sector-specific efforts and broader trade policy measures, therefore, remain critical for enhancing manufacturing and hence export competitiveness. Ensuring regulatory ease, facilitative Customs procedures and lower import duties on critical inputs need to be on the immediate trade policy agenda. This should be of particular importance for sectors with export and employment potential. It is hoped that the forthcoming Budget will take forward, in a comprehensive manner, the process of tariff reduction as initiated in the last two Budgets. These policies together with a long-overdue review of the 2016 model bilateral investment treaty will also assist in attracting export-oriented foreign direct investment as targeted in some of our recent FTAs such as with the European Free Trade Association  and New Zealand. 

Thirdly, India also needs to participate in next-generation mega-regional trade agreements. Having accomplished bilateral FTAs with developed economies like the UK and Australia and having navigated the diverse interests of the 27-member EU, India would now be better prepared to negotiate entry into the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). 

With the formalisation of a dialogue partnership with the Association of Southeast Asian Nations (Asean) and the EU in its November 2025 Melbourne summit, the CPTPP has emerged as the new axis for rules-based trade. There is now a coalition of the two most trade-intensive blocs in the world with the CPTPP. In addition, its member economies from the other two blocs — North America and Mercosur — such as Canada, Mexico, Chile, Peru and soon-to-be-member Uruguay, make CPTPP potentially the most capable of garnering collective action and cooperation against challenges to global trade and institutions. 

A mega-regional trade agreement has the added advantage of cumulation of value addition (VA), facilitated by flexible rules of origin (RoOs). This is an enabling factor for participation in GVCs for member economies. RoOs in CPTPP, for example, allow regional cumulation of value addition. Raw materials/ components processed in/ across member countries can qualify for “originating” status and hence preferential treatment by the exporter member economy. While yet at the ideation stage, potential extension of VA cumulation across the two dialogue partners (Asean and EU) could lead to the emergence of the CPTPP as a dynamic, global hub for rules-based economic integration. India should, therefore, not delay any further an announcement of its intent to participate in the CPTPP. 

It is also interesting to note that the CPTPP is a living agreement. A review of its terms and provisions has to be mandatorily undertaken every five years to maintain its relevance and high standard. The terms of the agreement were designed a decade ago while it was still a US-led TPP. These were modified only to a limited extent after the US withdrawal to give it the contours of CPTPP in 2018. The first review, initiated in 2023 and concluded in 2025, has recommended updating and revising a majority of the provisions of the agreement. This is not surprising, given the dramatic shifts in the global trade environment in the interim period. CPTPP members have committed to completing the revision process in 2026. India should closely track these evolutionary changes to prepare for participation in this ever-enlarging mega-regional trade agreement. 

Also, it is important that India’s decision to participate in the CPTPP should be independent of China’s absence in the mega-regional trade agreement. China was among the early applicants for CPTPP membership, followed soon — in the same month in 2021 — by Taiwan. China’s membership in the CPTPP has, so far, been delayed owing to the “Auckland principles” that necessitate an established record of the applicant country’s compliance with trade commitments, the ability to meet the agreement’s high standards, and consensus among CPTPP members for consideration of its application. So far, the accession process has not followed a sequential order for the consideration of applications. Later applicants such as Uruguay and the UAE are now under consideration for initiation of the accession process in 2026. However, circumstances may not remain the same for long, given how the world is rushing to resolve trade disputes and sign trade agreements with China. 

Overall, taking forward participation in bilateral, regional, as well as mega-regional trade agreements, supplemented by substantive domestic trade policy reforms, should be India’s FTA agenda in 2026. 

The author is professor, School of International Studies, JNU. Her book India’s Trade Policy in the 21st Century was published by Routledge, London, in 2022. The views are personal