Taking India's FTA Agenda Forward: A Strategic Roadmap for 2026

India's focus must shift to next-gen FTAs and significant domestic trade policy reforms for global market integration.

pocketias team

•January 29, 2026•7 mins read

India-EU FTA marks milestone, paving way for global trade expansion

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India–EU FTA and India’s Evolving Trade Strategy: From Bilateral Gains to Mega-Regional Integration

1. Context: Conclusion of India–EU FTA and Shift in Trade Strategy

The conclusion of negotiations on the India–European Union (EU) free trade agreement (FTA) is a significant achievement, especially given that discussions had been ongoing intermittently since 2007. The prolonged negotiation reflects the complexity of reconciling diverse economic interests between India and a 27-member economic bloc.

While geopolitical pressures accelerated talks over the past year, the agreement also signals a broader transformation in India’s trade policy. India has expanded its FTA engagement beyond traditional developing partners to include major developed economies.

Recent FTAs indicate not only wider partner coverage but also deeper commitments. The India–UK FTA, with nearly 90% tariff-line liberalisation, inclusion of environmental and labour standards, and calibrated opening of sensitive sectors through tariff-rate quotas, marks a qualitative shift.

Reportedly, the India–EU FTA shares these high-ambition features. This reflects India’s growing confidence and preparedness to engage in comprehensive, rules-based trade frameworks. Failure to consolidate this momentum could weaken India’s credibility as a serious trade partner.

“Trade agreements are no longer about tariffs alone, but about shaping economic governance.” — Pascal Lamy, Former WTO Director-General

Italicised reasoning: Modern FTAs signal strategic intent as much as commercial gain. If India does not build on this expanded scope and depth, earlier negotiation investments may yield diminishing returns.

2. Completing Formalities and Accelerating Ratification

Following the conclusion of negotiations, the immediate priority is to complete remaining formalities for signing the India–EU FTA within the next few months. Timely signing is crucial to initiate the EU’s ratification process.

Ratification by the European Parliament typically takes about one year. Completing this process within the coming financial year would allow Indian exporters to benefit sooner from preferential market access.

Speed is particularly important given the growing uncertainty surrounding the US market. Market diversification has become a strategic necessity rather than a choice, especially amid shifting trade policies and tariff regimes.

Delays in formalisation could result in opportunity costs, allowing competitor economies to consolidate their presence in the EU market ahead of India.

“In international trade, timing is often as important as terms.” — Jagdish Bhagwati

Italicised reasoning: Preferential access has value only when it is timely. Procedural delays can erode first-mover advantages and blunt diversification objectives.

3. Realising Benefits of Preferential Market Access

Preferential access under FTAs does not automatically translate into export gains. A clear delineation of post-FTA tasks is essential to convert market access into competitiveness.

Comparator developing economies such as Vietnam enjoy first-mover advantages in several FTA partner markets. This gap is visible in Australia, where Vietnam’s share of apparel imports has increased faster than India’s since 2022, despite India signing the Economic Cooperation and Trade Agreement with Australia in that year.

This highlights that FTAs must be complemented by sustained sector-specific strategies and broader trade policy reforms. Manufacturing competitiveness remains central to export performance.

Ensuring regulatory ease, facilitative Customs procedures, and lower import duties on critical inputs is particularly important for sectors with high export and employment potential. Without such measures, tariff preferences may remain underutilised.

Comparative example:

Vietnam’s apparel export share in Australia has widened relative to India since 2022, despite India’s FTA

“Exports are earned, not granted.” — Arvind Panagariya

Italicised reasoning: FTAs create opportunities, not outcomes. If domestic competitiveness does not improve, preferential access may fail to alter trade patterns.

4. Domestic Trade Policy Reforms and Investment Frameworks

Domestic trade policy must reinforce India’s FTA commitments. The forthcoming Union Budget is expected to advance the tariff-reduction process initiated in the last two Budgets, particularly for inputs critical to export manufacturing.

Lower input costs improve cost competitiveness and encourage scale in labour-intensive and export-oriented sectors. This is essential for translating FTAs into employment and value addition.

A long-overdue review of the 2016 Model Bilateral Investment Treaty (BIT) is also necessary. Modernising the investment framework can improve investor confidence while balancing regulatory space.

These reforms would support the objective of attracting export-oriented foreign direct investment (FDI), as envisaged in recent FTAs with partners such as the European Free Trade Association (EFTA) and New Zealand.

Policy measures:

Continued tariff rationalisation on critical inputs
Review of the 2016 Model BIT
Alignment of investment policy with FTA commitments

“Trade and investment are two sides of the same development coin.” — UNCTAD World Investment Report

Italicised reasoning: Without supportive domestic policies, FTAs cannot attract investment or boost exports sustainably. Policy misalignment can neutralise external trade gains.

5. Strategic Case for Mega-Regional Trade Agreements (CPTPP)

Having concluded high-standard bilateral FTAs with developed economies and successfully navigated negotiations with the EU, India is now better positioned to consider mega-regional trade agreements.

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) has emerged as the new axis of rules-based trade, especially after the formalisation of dialogue partnerships with Asean and the EU at the November 2025 Melbourne summit.

CPTPP brings together highly trade-intensive blocs and includes members from North America and Latin America, such as Canada, Mexico, Chile, Peru, and prospective member Uruguay. This gives it considerable potential for collective action in defence of global trade rules.

India’s participation would signal commitment to high-standard trade governance and deepen integration into global value chains.

“Mega-regional agreements shape the rules of tomorrow’s trade.” — World Economic Forum

Italicised reasoning: Exclusion from mega-regionals risks marginalisation in rule-setting. Participation allows influence over evolving trade norms rather than passive adjustment.

6. Value Addition, Rules of Origin, and Living Nature of CPTPP

A key advantage of mega-regional agreements like CPTPP lies in flexible rules of origin (RoOs) that allow cumulation of value addition across member economies. Inputs processed across member countries can qualify for preferential treatment.

Such cumulation facilitates deeper participation in global value chains (GVCs), particularly for manufacturing economies. Potential extension of value-addition cumulation across dialogue partners like Asean and the EU could further strengthen CPTPP as a global integration hub.

CPTPP is also a living agreement, with mandatory reviews every five years. The first review, initiated in 2023 and concluded in 2025, recommended updating a majority of provisions, with members committing to revisions in 2026.

India should closely track these changes to prepare for informed and timely participation.

Key features:

Regional value-addition cumulation under CPTPP RoOs
Mandatory five-year review mechanism
Major revisions scheduled for 2026

“Global value chains thrive on predictability and flexibility.” — OECD Trade Policy Outlook

Italicised reasoning: Dynamic agreements require continuous engagement. Late entry without preparedness can impose high adjustment costs.

7. CPTPP Accession and Strategic Autonomy vis-à-vis China

India’s consideration of CPTPP membership should remain independent of China’s current absence from the agreement. China applied for membership in 2021, followed by Taiwan in the same month.

China’s application has been delayed due to the “Auckland principles,” which require a demonstrated record of compliance, ability to meet high standards, and consensus among CPTPP members. Accession has not followed a sequential order, with later applicants like Uruguay and the UAE now under consideration for 2026.

Given the global rush to resolve trade disputes and deepen engagement with China, the current situation may evolve rapidly. India must take decisions based on its own strategic and economic interests.

“Strategic autonomy requires strategic engagement, not isolation.” — S. Jaishankar

Italicised reasoning: Trade strategy must be forward-looking and autonomous. Waiting for external alignments can reduce strategic space and influence.

Conclusion

India’s trade agenda for 2026 must build on the momentum of the India–EU FTA by accelerating ratification, strengthening domestic competitiveness, and expanding engagement into regional and mega-regional frameworks like the CPTPP. When complemented by substantive domestic reforms, this multi-layered trade strategy can enhance export resilience, investment inflows, and India’s role in shaping rules-based global trade governance.

Quick Q&A

Everything you need to know

The conclusion of the India–EU FTA is strategically significant because it marks a qualitative shift in India’s trade diplomacy from defensive engagement to calibrated ambition. Negotiations that began in 2007 were stalled for years due to differences over tariffs, standards, data protection, and services. Finalising the agreement now reflects India’s improved negotiating capacity, confidence in domestic manufacturing, and recognition that trade agreements are essential tools of geopolitical and economic strategy in an uncertain global environment.

The agreement reportedly mirrors the high ambition seen in India’s recent FTAs, particularly with the UK, including wide tariff-line liberalisation, inclusion of labour and environmental standards, and controlled opening of sensitive sectors through tariff rate quotas. This signals India’s readiness to align with advanced regulatory frameworks while safeguarding domestic interests. Such provisions also enhance India’s credibility as a rule-abiding and predictable trade partner, which is crucial for long-term investment decisions.

From a global perspective, the India–EU FTA supports India’s market diversification strategy away from excessive dependence on the US market, which has become increasingly volatile. For the EU, India represents a large, growing market and a strategic partner in the Indo-Pacific. Thus, the agreement is not merely a trade pact but a pillar of broader strategic convergence.

Speed is critical because trade agreements deliver benefits only when operational, and delays can erode competitive advantages. The EU’s ratification process typically takes close to a year, involving scrutiny by the European Parliament and member states. Any delay in signing would postpone market access benefits, precisely when global trade uncertainty and protectionism are rising. Early ratification would allow Indian exporters to capitalise on preferential access sooner rather than later.

Another reason for urgency is first-mover disadvantage. Comparator economies such as Vietnam already enjoy preferential access to EU and other developed markets, allowing them to integrate more deeply into global value chains (GVCs). The article cites Vietnam’s growing lead over India in Australia’s apparel imports even after India signed an FTA, highlighting that agreements alone are insufficient without timely and effective implementation.

Finally, swift ratification would send a strong signal to global investors about India’s seriousness in pursuing trade-led growth. In a world where supply chains are being reconfigured, timing can determine whether a country becomes a manufacturing hub or remains a peripheral player.

Translating FTAs into real economic gains requires complementary domestic trade and industrial reforms. Preferential market access is only useful if Indian firms are competitive in terms of cost, quality, and delivery. This necessitates regulatory simplification, efficient customs procedures, and rationalisation of import duties on critical inputs, especially for sectors with high export and employment potential such as textiles, electronics, and pharmaceuticals.

The article rightly stresses the need for sector-specific strategies. For instance, apparel and footwear exports require stable tariff regimes, faster logistics, and integration with regional value chains. Lessons from Vietnam show that aggressive utilisation of FTAs, combined with domestic reforms, can rapidly expand export market share. India must also strengthen trade facilitation infrastructure, including ports, testing labs, and standards compliance mechanisms.

Additionally, a long-overdue review of the 2016 Model Bilateral Investment Treaty is essential to attract export-oriented FDI. When aligned with FTAs such as those with the EU, EFTA, and New Zealand, improved investment protection can anchor India more firmly within global production networks.

Participation in the CPTPP offers significant opportunities but also entails adjustment costs. On the positive side, the CPTPP represents the most advanced rules-based trade architecture, covering areas such as digital trade, intellectual property, state-owned enterprises, and labour standards. Entry would provide Indian exporters access to a vast, diversified market spanning Asia, the Americas, and Oceania, reducing dependence on any single geography.

A major advantage lies in cumulation of value addition under flexible rules of origin. This would enable Indian firms to source inputs across CPTPP members while still qualifying for preferential access, facilitating deeper integration into GVCs. Such mechanisms are crucial for manufacturing-led growth and are currently a weakness in India’s trade ecosystem.

However, challenges remain. High standards could strain small producers, and sensitive sectors may face import competition. The key lies in sequencing—undertaking domestic reforms in parallel and negotiating safeguards. Overall, the strategic gains of shaping global trade rules from within outweigh the costs of staying outside.

The CPTPP’s rising importance stems from its ability to aggregate major trade-intensive blocs under a single, high-standard framework. With dialogue partnerships involving ASEAN and the EU, and members spanning North America and Mercosur, the CPTPP has emerged as a platform capable of collective action in defence of rules-based trade. This is particularly relevant as multilateral institutions like the WTO face paralysis.

Another reason is its dynamic nature. Unlike static FTAs, the CPTPP mandates periodic reviews, ensuring adaptability to evolving trade realities. The 2025 review and planned revisions in 2026 demonstrate responsiveness to shifts such as digitalisation, sustainability concerns, and geopolitical fragmentation. This keeps the agreement relevant and attractive to new entrants.

For countries like India, the CPTPP represents not just a market but a rule-making forum. Participation would allow India to influence future trade norms rather than being a passive rule-taker.

India’s decision to engage with the CPTPP should be guided by its own strategic and economic interests, not China’s membership status. The article highlights that China’s accession remains uncertain due to stringent entry criteria and lack of consensus among members. Meanwhile, other applicants such as Uruguay and the UAE are progressing, illustrating the fluidity of the accession process.

India should therefore adopt a proactive approach—closely tracking ongoing revisions, aligning domestic regulations with emerging standards, and signalling intent to participate. This would enhance India’s bargaining power and preparedness, regardless of China’s eventual entry. Delaying could leave India isolated as major economies coalesce around mega-regional frameworks.

Ultimately, CPTPP participation should be viewed as part of a broader 2026 FTA agenda that combines bilateral, regional, and mega-regional engagement with deep domestic reforms. This integrated approach is essential for securing India’s long-term position in global trade.

Attribution

Original content sources and authors

Amita Batra

Business Standard

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