India's FTA use at 25%

India’s free-trade agreements are not delivering their full value because many exporters are failing to claim the tariff preferences already available under them. Experts cited by The Hindu BusinessLine said on May 25 that India’s FTA utilisation rate has historically hovered around 25%, far below the 70-80% seen in developed economies. That leaves part of India’s export base paying duties that could have been reduced or eliminated under existing pacts. The gap has shifted attention from signing new agreements to making current ones usable in day-to-day trade operations. ### Why are exporters missing benefits that already exist on paper? The 25% figure points less to a lack of trade agreements than to failures inside company processes. Experts told The Hindu BusinessLine that exporters often fall short on documentation, origin tracing, tariff-line classification and internal coordination needed to claim preferential access under FTAs. Those are the steps that determine whether a shipment qualifies for lower duty at the destination market. (thehindubusinessline.com) Rules of origin are one of the main choke points. An exporter may source inputs from multiple countries, process them in India and still need to prove that the finished product meets the agreement’s origin threshold. If sourcing, finance, compliance and dispatch teams are not working from the same records, the preference claim can fail even when the product is eligible. That problem is compounded by weak knowledge of HS codes, the tariff classifications used to determine the duty treatment of goods. (thehindubusinessline.com) ### Why does the utilisation rate matter so much for exporters? A tariff preference matters only when it is actually claimed at the border. BusinessLine reported that experts now describe closing the utilisation gap as the highest-leverage trade reform available because it can improve exporter competitiveness without waiting for a new negotiation cycle. For many firms, especially in engineering, electronics and textiles, the commercial gain is immediate: lower landed cost, better pricing room and a stronger chance of winning orders in markets where rivals already use trade agreements more effectively. (thehindubusinessline.com) The contrast with developed economies is central to that argument. Their 70-80% utilisation rates suggest that the main constraint is not whether FTAs exist, but whether firms and trade systems are set up to use them consistently. In India’s case, the underuse means negotiated market access is not translating into the export gains policymakers expect. (thehindubusinessline.com) ### Is the government treating this as an implementation problem? The Commerce Department has started assessing infrastructure requirements in industrial clusters to help exporters benefit more from FTAs, The Hindu BusinessLine reported on May 14. The review covers needs such as testing facilities and international certification processes for sectors expected to use pacts with partners including Australia, the UK, the UAE, Oman and the European Union. (thehindubusinessline.com) A separate BusinessLine report on May 19 said industry participants discussing the proposed India-EU trade pact also stressed that practical gains would depend on quality compliance and the ability of exporters, MSMEs and service providers to convert agreements into actual market access. That adds a second layer to the problem: even when tariffs fall, firms still need systems that satisfy technical standards and documentary requirements. (thehindubusinessline.com) ### What changes inside companies would raise usage fastest? The operational fixes are mundane but specific. Exporters need product-level checks on which goods qualify under each agreement, faster proof of origin, cleaner HS-code mapping and tighter handoffs between sourcing, finance and dispatch. Those steps determine whether an FTA remains a policy headline or becomes a lower invoice at customs. This is an inference drawn from the expert concerns described by BusinessLine. (thehindubusinessline.com) India already has more than 18 FTAs, BusinessLine reported in a December 2025 article, and more agreements may follow in 2026. The next test is whether exporters, industry bodies and the Commerce Department can turn those signed pacts into higher claim rates through cluster support, certification capacity and company-level compliance systems. (thehindubusinessline.com 1) (thehindubusinessline.com 2)