India’s Expanding FTA Network: A New Phase in Global Trade Strategy

India is entering a new phase in its global trade strategy, marked by an expanding network of Free Trade Agreements (FTAs). While negotiations with the United States remain uncertain due to legal and geopolitical complexities, India has accelerated partnerships with other regions. The most notable recent development is the India–New Zealand Free Trade Agreement (FTA), widely described as a “once-in-a-generation” deal.

This agreement not only reflects India’s evolving trade policy but also signals a broader shift—from cautious protectionism to calibrated global integration.

Understanding FTAs: Beyond Tariff Reduction

A Free Trade Agreement is designed to facilitate trade by:

• Eliminating or reducing tariffs on goods
• Simplifying non-tariff barriers (regulations, standards)
• Promoting trade in services
• Encouraging investment flows

Modern FTAs go further by including digital trade, supply chain cooperation, labour mobility, and regulatory alignment. The India–New Zealand agreement reflects this comprehensive approach.

India–New Zealand FTA: A Landmark Breakthrough

After nearly 16 years of intermittent negotiations—beginning in 2010 and gaining momentum in 2025—the agreement was finalized within a year of revived talks. It stands out for both its speed and scope.

Key Highlights

• Zero tariffs on 100% of Indian exports to New Zealand
• 95% market access granted to New Zealand goods in India
• Protection retained for sensitive sectors (like dairy and select agriculture)
• $20 billion investment commitment from New Zealand over 15 years
• 5,000 annual work visas and 1,000 working holiday visas for Indians
• Bilateral trade target: $5 billion within five years (from ~$2.4 billion currently)

Sectors such as textiles, leather, engineering goods, plastics, and electronics are expected to benefit significantly, as tariffs that were previously as high as 10% are now eliminated.

The Dairy Dilemma: Why Negotiations Took So Long

The biggest hurdle in finalizing the agreement was the dairy sector.

• New Zealand is a global dairy export powerhouse
• India’s dairy sector supports over 80 million people, mostly small farmers

Opening the Indian market completely could have led to a flood of cheaper imports, threatening rural livelihoods. As a result, India adopted a cautious stance.

The final agreement reflects a balanced compromise—India protected its sensitive sectors, while New Zealand accepted phased and limited access.

Expanding Opportunities in Services and Labour Mobility

India’s strength lies in services, including IT, finance, education, and tourism. The FTA enhances access for these sectors, enabling India to leverage its comparative advantage in skilled labour and digital capabilities.

The inclusion of labour mobility provisions—5,000 work visas annually—opens new opportunities for Indian professionals, especially in IT, healthcare, and engineering.

Investment and Supply Chain Integration

The commitment of $20 billion in investments is expected to boost:

• Infrastructure development
• Renewable energy expansion
• Manufacturing growth
• Technology collaboration

Additionally, regulatory cooperation—such as simplified customs procedures and harmonized standards—will reduce trade friction and improve supply chain efficiency.

Strategic and Geopolitical Significance

The India–New Zealand FTA carries importance beyond economics:

Indo-Pacific Strategy

It strengthens India’s presence in the Indo-Pacific and integrates it further into non-China supply chains.

Reducing Dependence on China

Both countries aim to diversify trade and reduce reliance on China, enhancing strategic autonomy.

Policy Shift from RCEP

India’s earlier withdrawal from RCEP signaled caution. However, recent agreements with countries like the UAE and Australia—and now New Zealand—highlight a shift toward targeted bilateral trade partnerships.

India’s Broader FTA Landscape

India’s trade engagement is becoming increasingly diversified, with negotiations or agreements involving:

• North America (Canada)
• South America (Chile)
• Africa (South Africa)
• Middle East (Saudi Arabia)
• European Union (expected around 2027)
• Existing partners: ASEAN, Japan, South Korea, Australia

However, trade relations with Russia remain complex, with a significant trade imbalance driven largely by energy imports.

How India Compares Globally

India’s expanding FTA network contrasts with other major economies:

• The United States has relatively limited FTAs, focused on select regions
• China has leveraged broader frameworks like RCEP for market access

India, in contrast, is pursuing a country-specific, interest-driven FTA strategy, allowing greater flexibility to protect domestic sectors while expanding global trade.

Sectoral Impact

Gains for India

• Labour-intensive sectors: textiles, leather, handicrafts
• High-value sectors: pharmaceuticals, engineering goods, automobiles
• Services: IT and education exports

Gains for New Zealand

• Agricultural exports: fruits, meat, wine
• Access to India’s premium consumer market
• Challenges and Risks

Despite its promise, the agreement comes with challenges:

• Risk of rising trade deficit if imports grow faster than exports
• Resistance from farmers and domestic industries
• Implementation complexities (rules of origin, customs procedures)
• Difficulty in addressing non-tariff barriers

The Real Test: Competitiveness and “Brand India”

Signing FTAs is only the first step. Their success depends on deeper structural changes:

1. Quality and Competitiveness

Indian products must meet global standards to compete internationally.

2. Consumer Behaviour

Greater domestic support for “Make in India” products is essential.

3. Corporate Vision

Indian firms must aim to build globally recognized brands.

4. Global Image Building

India faces a branding challenge. Negative portrayals on social media platforms can affect perceptions of Indian goods. A strong global PR strategy is needed to strengthen “Brand India.”

Countries like Japan and Germany have built strong reputations for quality—India must aim for a similar global perception.

Conclusion: A Balanced but Defining Moment

The India–New Zealand FTA is more than just a trade deal—it is a comprehensive economic partnership that combines trade, investment, and labour mobility. Its rapid conclusion, balanced design, and strategic depth make it a defining milestone in India’s trade journey.

However, the ultimate success of this agreement—and India’s broader FTA strategy—will depend not just on market access, but on India’s ability to enhance competitiveness, build global brands, and effectively integrate into global value chains.

The Economic Survey 2025–26: An Analytical Overview of India’s Macroeconomic Performance

Why This Economic Survey Matters

Every year, just before the Union Budget, the Government of India releases the Economic Survey—a document that goes beyond numbers to explain how and why the economy is moving in a particular direction. The Economic Survey 2025–26, tabled in Parliament by Finance Minister Nirmala Sitharaman, comes at a time when the global economic order is undergoing deep structural stress.  Prepared by the Economic Division of the Department of Economic Affairs under the Ministry of Finance, the Economic Survey is guided by the Chief Economic Adviser and approved by the Finance Minister. The Survey evaluates economic developments during the ongoing financial year (April 2025–March 2026), while the forthcoming Budget outlines fiscal plans for the subsequent year, 2026–27. Although its recommendations are not legally binding on the government, they play a crucial advisory role in shaping policy discourse and fiscal strategy. 

Trade wars, geopolitical conflicts, technology restrictions, and the weaponization of finance have reshaped global economic governance. Against this backdrop, the Survey positions India as an economy that has managed relative stability and resilience amid global turbulence.

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Evolution and Structure of the Economic Survey

India’s first Economic Survey was presented in 1950–51 and, until 1964, it was released alongside the Union Budget. Over time, its format evolved—from a single-volume document to a two-volume structure post-2010, and later reverting to a single-volume format under the leadership of the current Chief Economic Adviser. This restructuring reflects an effort to present a more integrated and policy-oriented assessment.

The Economic Survey 2025–26 is organised into sixteen thematic chapters covering the state of the economy, fiscal developments, monetary management, financial intermediation, inflation, agriculture, industry, services, external sector, environment, education, health, employment, and skill development. The front cover symbolically emphasises exports, manufacturing, and trade, signalling the Survey’s central theme: strengthening India’s position in global trade through manufacturing expansion and export competitiveness.

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Global Economic Environment and India’s Resilience

The Survey highlights significant global policy uncertainty, driven by intensifying geopolitical conflicts, the weaponisation of trade, finance, and energy, and rising protectionism—particularly in the context of renewed tariff-based trade policies. Global uncertainty, which had spiked during the 2008 financial crisis, has reached even higher levels in 2024–25 due to geopolitical tensions and strategic technology restrictions. Despite these adverse global conditions, the Survey underscores India’s relative macroeconomic resilience. Compared to major economies such as the United States, the United Kingdom, and China—which are grappling with high fiscal and primary deficits—India has maintained comparatively stable fiscal indicators. Alongside Brazil, India stands out for containing its primary deficit within manageable limits.

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Growth Outlook and Demand-Side Drivers

The Economic Survey projects India’s real GDP growth for 2026–27 in the range of 6.8% to 7.2%, while growth for the current year (2025–26) is estimated at 7.4%, exceeding earlier projections. This robust performance is largely attributed to strong private consumption and a recovery in investment activity.

From a demand-side perspective, the Survey reiterates the GDP identity—private consumption, private investment, government expenditure, and net exports—as key growth drivers. Data indicate sustained growth in private consumption since 2015–16, while investment growth, after a temporary slowdown post-2022–23, has regained momentum. On the supply side, Gross Value Added (GVA), which reflects sectoral production across agriculture, industry, and services, is estimated to grow at approximately 7.3% during 2025–26, reinforcing the broad-based nature of economic expansion.

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Fiscal Consolidation and Revenue Performance

Fiscal consolidation remains a central achievement highlighted in the Survey. Following the sharp deterioration in fiscal balances during the COVID-19 pandemic—when the fiscal deficit peaked at 9.2% of GDP in 2020–21—the government has steadily reduced the deficit to 4.4% of GDP in 2025–26. The primary deficit has been compressed to 0.8%, reflecting prudent expenditure management.

This fiscal discipline has contributed to improved sovereign credit ratings. Notably, after nearly two decades, Standard & Poor’s upgraded India’s sovereign rating from BBB– to BBB, citing sustained fiscal consolidation as a key factor. The Survey also reports a significant improvement in revenue buoyancy. The composition of tax revenues has shifted in favour of direct taxes, reducing the regressive burden of indirect taxation. The share of direct taxes in total tax revenue has increased from 52% (pre-pandemic) to 59%, while indirect taxes have declined to 41%. 

Additionally, income tax compliance has improved markedly, with the number of income tax returns rising from 6.9 crore in 2021–22 to 9.2 crore, indicating greater formalisation of the economy.

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Monetary Management and Financial Sector Health

The chapter on monetary management evaluates the effectiveness of the Reserve Bank of India’s policy transmission. The Survey finds that changes in the policy repo rate have been effectively transmitted to bank lending rates, improving monetary policy efficiency.

Banking sector health has improved significantly, with Gross Non-Performing Assets declining from over 11% in 2016–17 to 2.2%, enabling banks to expand credit, particularly to MSMEs. Pension coverage has expanded rapidly under schemes such as the Atal Pension Yojana and the National Pension System, enhancing long-term financial security. Insurance penetration has also increased, with life insurance premiums rising from ₹6.3 lakh crore (2020–21) to ₹8.9 lakh crore, and non-life insurance premiums growing from ₹2 lakh crore to ₹3.1 lakh crore, supporting the objective of “Insurance for All.”

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Capital Markets, Microcredit, and Financial Inclusion

India’s capital markets have witnessed remarkable growth, particularly in the primary market. IPO activity has surged, reflecting investor confidence and corporate expansion. Simultaneously, microcredit initiatives under the Pradhan Mantri Mudra Yojana have disbursed over ₹36 lakh crore across 55 crore loan accounts, with women accounting for nearly 69% of beneficiaries—highlighting inclusive financial deepening.

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External Sector Performance and Trade Dynamics

Despite global trade disruptions, India’s trade performance has been relatively stable. Imports increased by 5.9%, while exports grew by 2.4%, leading to a trade deficit of $28 billion. However, services exports performed strongly, creating a surplus of $151 billion, offsetting the goods trade deficit. India has signed FTAs and CEPAs with eight countries in the last five years and is negotiating several more. The current account deficit declined from 1.3% of GDP to 0.8% in 2025–26 (H1). While global trade growth has slowed due to geopolitical tensions, India’s external sector performance has remained relatively stable. Merchandise trade continues to record a deficit, which widened to USD 28 billion, but this is substantially offset by strong services exports. Forex reserves have more than doubled over the past decade, crossing $700 billion. External debt has declined to 19.2% of GDP, and import cover stands at 11 months.

Services exports grew by over 12%, generating a surplus of USD 151 billion, driven primarily by IT and software services. Consequently, the current account deficit declined from 1.3% of GDP to 0.8%, indicating improved external sustainability. The Survey also notes India’s expanding network of Free Trade Agreements and Comprehensive Economic Partnership Agreements, including recent agreements with the European Union, UAE, Australia, and the UK, alongside ongoing negotiations with the US and ASEAN partners.

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Inflation Trends and Price Stability

India recorded one of the lowest inflation rates globally during 2025–26. Headline inflation averaged 1.3%, while core inflation stood at 4.6%, influenced largely by rising precious metal prices. Food inflation turned negative due to lower prices of vegetables and pulses, aided by timely government interventions and improved supply management.

The Survey cautions that inflation may rise moderately in 2026–27 due to currency depreciation and import costs, but maintains that macroeconomic fundamentals remain strong enough to manage such pressures.

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Agriculture and Structural Support

Agricultural growth remained stable, with notable gains in livestock (6.1%) and fisheries and aquaculture (7.2%). Crop sector growth hovered around 4%, consistent with structural constraints such as limited arable land. Government initiatives—including MSP, PM-KISAN, crop insurance, irrigation, and soil health programs—continue to support farm incomes and productivity.

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Concluding Geo-Economic Insight

The Economic Survey 2025–26 presents India as an economy that is not immune to global shocks but better prepared to absorb them. Fiscal discipline, domestic demand strength, financial sector stability, and services-led external resilience form the backbone of this preparedness. The Survey underscores the importance of sustaining reforms in manufacturing, trade, digital infrastructure, and human capital to maintain long-term growth and macroeconomic stability.

In an era of fragmented globalisation, India’s challenge is clear:

to convert short-term resilience into long-term structural power through manufacturing depth, export diversification, digital leadership, and sustained institutional reform.