Free Trade Agreements (FTA): Bilateral, Multilateral and Future Outlook

In the modern world, free trade policy states the absence of any trade restrictions between two or more nations implemented by a formal and mutual agreement. It’s completely the opposite of trade protectionism or economic isolationism. Many countries enter into free trade agreements for the betterment of trade across industries. Let’s dive deeper. 

Key takeaways

• Free trade agreements are international legal pacts between two or more countries to minimise any barriers that impede international imports and exports. 
• There are 16+ FTA that India has entered into which are active.
• Bilateral trade agreement is signed between the two nations, unlike multilateral trade agreements that involve more than two countries.

What is a Free Trade Agreement (FTA)?

Free trade agreements are international legal pacts between two or more countries to minimise any barriers that impede international imports and exports. The free trade policy allows merchants to make transactions across international borders by removing government-imposed barriers which include tariffs and quotas and subsidies. The concept of trade freedom exists under two alternative terms: “laissez-faire trade” alongside “trade liberalisation.” In this regard, India has made free trade with many nations across the globe to boost its local business.

List of Free Trade Agreements by India

So far, India has signed the following FTAs with different countries, as mentioned below.

1. India-Sri Lanka Free Trade Agreement (FTA)
2. Agreement on South Asian Free Trade Area (SAFTA)
3. India-Nepal Treaty of Trade
4. India-Bhutan Agreement on Trade, Commerce and Transit
5. India-Thailand FTA - Early Harvest Scheme (EHS)
6. India-Singapore Comprehensive Economic Cooperation Agreement (CECA)
7. India-ASEAN CECA - Trade in Goods, Services and Investment Agreement
8. India-South Korea Comprehensive Economic Partnership Agreement (CEPA)
9. India-Japan CEPA
10. India-Malaysia CECA
11. India-Mauritius Comprehensive Economic Cooperation and Partnership Agreement (CECPA)
12. India-UAE CEPA (*)
13. India-Australia Economic Cooperation and Trade Agreement (ECTA) (*)
14. India–EFTA Trade and Economic Partnership Agreement (TEPA) with Iceland, Liechtenstein, Norway, Switzerland. (*)
15. India–UK Comprehensive Economic and Trade Agreement (often called CETA/FTA) (*)

 (*) Signed, but yet to be implemented.

Bilateral Trade Agreements of India

The bilateral trade agreement is signed between the two nations, unlike multilateral trade agreements that involve more than two countries. 

Here is the list of key bilateral trade agreements of India for your reference: 

1. Afghanistan–India Preferential Trade Agreement (PTA)
2. India–Australia Economic Cooperation and Trade Agreement (ECTA) (*)
3. Chile–India Preferential Trade Agreement (PTA)
4. Japan-India Comprehensive Economic Partnership Agreement (JICEPA)
5. India-Malaysia Comprehensive Economic Cooperation Agreement (CECA)
6. India Mauritius Comprehensive Economic Cooperation and Partnership Agreement (CECPA)
7. India-Thailand Free Trade Agreement
8. India Singapore Comprehensive Economic Cooperation Agreement
9. India-Korea Comprehensive Economic Partnership Agreement (IKCEPA)
10. India Sri Lanka Free Trade Agreement (ISFTA)
11. India UAE Comprehensive Economic Partnership Agreement

Multilateral Trade Agreements of India

India has also signed multilateral agreements in groups with more than two nations as follows: 

Benefits of FTAs for India

A nation with an FTA might also run policies to exempt specific products from tariff-free status to support local producers from foreign competition. Free trade agreements support small to medium companies who want to trade in the international market with the following benefits: 

Lower tariffs, more exports: due to low tariffs, businesses find it cheaper to export items like readymade garments, leather goods, and processed foods in huge numbers than before 

Support for Small Business (SMEs & MSMEs): SMEs and MSMEs get the chance to do business in the internal market for maximum ROI

Government incentive for exporters: businesses receive additional support through various schemes such as: 

• Interest Equalisation Scheme: for discounted loan interest 
• Merchandise Exports from India Scheme (MEIS): incentive for international exports
• Services Exports from India Scheme (SEIS): supports service-based exports 
• Expert House Recognition: special recognition from the Indian government for making a significant contribution to the country’s foreign trade 

Better infrastructure & logistics for trade: The Department of Commerce facilitates smooth logistics to export goods outside India at low costs and as fast as possible 

Impact of Free Trade Agreements

The governments with free-trade policies or agreements in place do not necessarily abandon all their powers over imports and exports. They can exercise some protectionist policies, as per the requirement. 

For example, a nation with an FTA in place with another nation might restrict the import of regulator-unapproved drugs, non-vaccinated animals, or processed foods that do not meet its standards.

Here is a quick summary of the impact of FTA on different business sectors of India. 

India’s FTA Updates in 2025

2025 marked a breakthrough year for India’s trade diplomacy, with three new agreements concluded (India–UK CETA, India–Oman CEPA, India–New Zealand FTA) alongside EFTA TEPA entering force on 1st Oct 2025, bringing active FTAs to 16+. Key developments:

• India–UK Comprehensive Economic and Trade Agreement (CETA): Signed 24 Jul 2025 after PM Modi’s UK visit; projected to add USD 34 billion in annual bilateral trade via tariff cuts on services/IT and goods. Expected in force early 2026.
• India–Oman CEPA: Signed 18 Dec 2025; 98% Indian exports (textiles, gems, engineering, food) duty‑free to Oman; to enter force in Q1 2026.
• India–New Zealand FTA: Negotiations concluded 22 Dec 2025 after final talks on 10 Dec; aims to double bilateral trade (from ~USD 1.5 billion) in 5 years, with Financial Services Annex beyond GATS commitments.
• India–EFTA TEPA: In force 1 Oct 2025 (all 4 EFTA states ratified); first‑ever USD 100 billion investment pledge over 15 years (~1 million jobs).

Ongoing: Negotiations advanced with Chile CEPA (launched Apr 2025, lithium focus), EAEU (ToR signed Aug 2025, USD 69 billion 2024 trade base), EU (11th round May 2025, target end‑2025), and US (mini‑deal talks). These updates boosted FTA utilisation to 20–30% across sectors such as pharma/engineering.

Revised Future Outlook

India’s 2025 FTAs (UK, Oman, NZ, EFTA) position it for USD 500+ billion annual exports by 2030, emphasising services/digital trade (IT/ITeS, finance) and critical minerals. UK CETA alone targets USD 34 billion uplift; digital economy focus aligns with USD 1 trillion GDP addition by 2028 (revised from outdated 2025 goal). Talks with Canada, EU, GCC resume in 2026, prioritising MSMEs and sustainability.