India’s exports to FTA partners fall for third straight quarter: NITI Aayog data

NITI Aayog's Trade Watch quarterly report revealed that India's merchandise exports to Free Trade Agreement (FTA) partner countries declined for the third co...

What Happened

NITI Aayog's Trade Watch quarterly report revealed that India's merchandise exports to Free Trade Agreement (FTA) partner countries declined for the third consecutive quarter in Q3 FY 2025-26 (October–December 2025).
Exports to FTA partners stood at $40.26 billion in Q3 FY26, a 7 percent fall year-on-year, while imports from FTA partners rose 6 percent to $70.98 billion — widening the trade deficit with FTA countries to over $30 billion for the quarter.
The overall share of FTA partners in India's total trade has risen to 28.8 percent, indicating deeper integration, but the benefit has accrued predominantly to imports rather than exports.
The trade deficit with FTA countries widened sharply — in Q1 FY26, it had already surged 59 percent year-on-year to $26.7 billion as imports rose 10 percent and exports fell 9 percent.
NITI Aayog noted that India's export basket with FTA partners remains concentrated in jewellery and gems, with limited diversification into higher-value manufactured goods.
The report also observed that FTAs enable access to cheaper inputs and components that enhance domestic industrial competitiveness, and urged treating imports as a "two-way street" rather than solely a trade deficit concern.

Static Topic Bridges

Free Trade Agreements (FTAs) and Comprehensive Economic Partnership Agreements (CEPAs)

A Free Trade Agreement (FTA) is a pact between two or more countries to reduce or eliminate tariffs, quotas, and other trade barriers on goods and services. India uses the term CEPA (Comprehensive Economic Partnership Agreement) for more expansive agreements that include trade in goods, services, investment, and intellectual property — such as the India-UAE CEPA (2022) and the India-South Korea CEPA. Standard FTAs, such as the ASEAN-India FTA (2010), focus primarily on goods.

India's active FTA/CEPA portfolio now spans over 16 agreements, with the India-UK Comprehensive Economic and Trade Agreement (CETA), India-Oman CEPA, and India-New Zealand FTA all concluded in 2025. The EFTA-India Trade and Economic Partnership Agreement (TEPA) entered into force on 1 October 2025.

India-UAE CEPA (2022): 97% of UAE tariff lines duty-free; 90% of India's exports become immediately duty-free
India-ASEAN FTA (2010): Historically associated with a widening trade deficit — India's imports from ASEAN have significantly outpaced exports
India-UK CETA (2025): Projected to add $34 billion in annual bilateral trade via tariff cuts on services/IT and goods
India-South Korea CEPA: Signed 2009; another agreement where India faces a persistent trade deficit

Connection to this news: The three-quarter consecutive decline in India's exports to FTA partners reflects a structural problem — India is not leveraging tariff concessions to expand its export basket, while partner countries are effectively using Indian market access to grow their exports to India.

NITI Aayog's Trade Watch: Role and Significance

NITI Aayog's Trade Watch is a quarterly analytical publication that tracks India's trade performance, including FTA utilisation, export basket composition, and partner-country trends. It serves a policy advisory role by identifying structural weaknesses in trade competitiveness and informing negotiations for future trade agreements.

Trade Watch provides disaggregated data on bilateral trade flows with FTA vs. non-FTA partners
It covers merchandise exports and imports, trade balance trends, and product-level concentration
The report influences the Ministry of Commerce's approach to ongoing and future trade negotiations
NITI Aayog's role is advisory — it does not negotiate or ratify trade agreements, which is the mandate of the Ministry of Commerce and Industry

Connection to this news: The Trade Watch report's finding that FTA export declines have persisted for three straight quarters has sparked policy debate about whether India's existing agreements are designed optimally and whether domestic supply-side constraints are limiting India's export capacity.

India's Trade Deficit with FTA Partners: Structural Pattern

India has historically run persistent trade deficits with most of its FTA partners — a pattern observed with ASEAN, Japan, South Korea, and now the UAE. This has led economists to question FTA design: whether tariff concessions are reciprocally matched, whether rules-of-origin provisions are stringent enough, and whether services trade is adequately included alongside goods.

India's trade deficit with FTA countries widened 59% in Q1 FY26 year-on-year
Import penetration from FTA partners has risen particularly in electronics, machinery, and chemical intermediates
Export concentration remains in jewellery, textiles, and petroleum products — sectors with volatile global demand
Rules of Origin (RoO) provisions determine whether goods from third countries re-routed through FTA partners qualify for preferential tariffs

Connection to this news: The persistent export decline alongside rising imports from FTA partners reinforces the structural critique that India's FTA design may have inadvertently prioritised import facilitation over export promotion, particularly in manufactured goods.

Key Facts & Data

India's exports to FTA partners fell 7% year-on-year in Q3 FY2025-26 to $40.26 billion
Imports from FTA partners rose 6% to $70.98 billion in the same quarter — a deficit of over $30 billion
In Q1 FY26, the FTA trade deficit surged 59% year-on-year to $26.7 billion
FTA partners' share in India's total trade reached 28.8 percent in 2024, up from 4.6 percent in 2006
India has concluded 16+ trade agreements; 3 new agreements were signed in 2025 (UK CETA, Oman CEPA, New Zealand FTA)
India's export basket with FTA partners is concentrated in jewellery, gems, and petroleum products
India-ASEAN FTA entered into force in 2010; India-UAE CEPA in 2022; India-South Korea CEPA in 2009
NITI Aayog's Trade Watch report is released quarterly and covers merchandise trade flows with FTA and non-FTA partners