India FTA Strategy: Can the Tariff King Master Free Trade

The "Tariff King" label is an unpleasant one, but it has stuck to India for decades - India FTA Strategy. However, as we move through 2025, the narrative is shifting. From the historic India-EFTA (TEPA) agreement to ongoing negotiations with the UK and EU, India is taking optimistic steps toward global integration.

Yet, a fundamental question remains: Is India’s domestic industry ready for the "creative destruction" of global capitalism? While the Commerce Ministry projects $100 billion in FDI and 1 million jobs, critics like NITI Aayog CEO B.V.R. Subrahmanyam warn that India is still trading in goods the rest of the world simply doesn't want.

At a Glance: India’s Trade Readiness

• The Milestone: The India-EFTA (TEPA) deal targets $100B in investment, signaling a departure from old-school protectionism.
• The Structural Gap: 66% of global imports are in sectors where India holds only a 0.2% share.
• The "Three I’s": Future success requires Input liberalization, Incentives, and Infrastructure.
• The Proposal: A dedicated FTA Minister is needed to manage complex regulatory convergence and non-tariff barriers.

1. The India-EFTA Deal: A Masterclass in Diplomatic Optimism

On March 10, 2024, India signed the Trade and Economic Partnership Agreement (TEPA) with the European Free Trade Association (Switzerland, Norway, Iceland, and Liechtenstein). This wasn't just a trade deal; it was a signal.

Key Features of TEPA:

• Tariff Concessions: EFTA will cut tariffs on 92.2% of its lines; India will open 82.7% of its lines.
• Investment Clause: A unique commitment to "aim to" invest $100 billion over 15 years.
• Safety Nets: India excluded sensitive sectors like dairy, gold, and soyabean, while retaining the right to withdraw concessions if investment targets aren't met.

However, the challenge lies in Non-Tariff Barriers (NTBs). Because EFTA follows EU-dictated regulatory standards, Indian MSMEs must invest heavily in compliance to actually benefit from these lower tariffs.

2. The Hard Truth: "We Trade in Stuff the World Doesn't Want"

In late 2025, NITI Aayog's CEO highlighted a stark reality: India’s export basket is misaligned with global demand.

To fix this, India must pivot. It isn't just about market access; it's about transforming the product.

3. Seven Pillars for India to Become an "FTA King"

I. Dismantling the Bureaucracy King

While we cut tariffs, our "Bureaucracy King" status remains. Logistics, port delays, and "single-window" systems that aren't truly unified continue to hamper trade.

II. Moving Up the Global Value Chain (GVC)

True value comes from importing components (e.g., semiconductors), adding value (e.g., car dashboards), and re-exporting. This requires the Three I’s:

• Input Liberalization: Lowering costs for raw materials.
• Incentives: Refining Performance-Linked Incentive (PLI) schemes.
• Infrastructure: World-class digital and physical logistics.

III. Institutional Stability and Predictability

Global trade thrives on trust. India needs clear Rules of Origin and a judicial system that can resolve trade disputes without decade-long delays.

IV. SME Export Readiness

Our strength lies in niche engineering and specialty chemicals. However, these clusters need regulatory hand-holding to absorb the high costs of global compliance and certification.

V. Prioritizing Industrial Complementarity

Not all FTAs are equal. India should focus on partners where strengths align—such as the UK, ASEAN+6, and Africa—rather than deals that lead to one-sided import flooding.

VI. Leveraging "Services and Labor" Dominance

As the world’s "Services King," India must push for Mode 4 mobility (the movement of skilled professionals) and mutual recognition of degrees in every trade negotiation.

VII. The Capitalist Mindset Shift

Indian companies must stop fearing competition and start investing in market research, branding, and global partnerships. 1990s-style reforms proved that competition creates champions.

4. The Case for a Dedicated FTA Minister

The current muddled bureaucracy is understaffed and spread too thin. India needs a Dedicated FTA Minister with a specialized team to:

1. Track Investment Flows: Ensure the "aim to" $100B in TEPA becomes a reality.
2. Enforce NTB Removal: Aggressively fight for the removal of unfair standards blocking Indian goods abroad.
3. Modernize Export Promotion Councils (EPCs): Turn them into "incubation houses" that provide cloud compliance labs for small exporters.

Conclusion: Embracing Schumpeterian Growth

In 2019, India walked away from RCEP out of fear. In 2025, the notification of new labor codes and the signing of the EFTA deal suggest a country finally ready to embrace the Schumpeterian mindset: the understanding that for a new, stronger economy to be born, old, inefficient protections must die.

The road to becoming the "FTA King" is long, but the transition from protectionism to proactive capitalism is no longer optional—it is the only way to ensure India's $5 trillion future.

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