INDIA’S TRADE NEGOTIATION strategy and philosophy have undergone a sea change over the past couple of years. Commerce minister Piyush Goyal recently shared an interesting anecdote that highlights this course correction. It reveals how trade negotiations used to be fraught with lopsided terms, strain for Indian companies, and an unmindful-cum-aggressive push for deals with competing nations like China, and Southeast Asian countries, all of which were almost simultaneously vying for the global exports pie. This effectively defeated the purpose of having a bilateral trade pact.

The anecdote pertains to the Regional Comprehensive Economic Partnership (RCEP) negotiations — a China-led 15-nation trading block, comprising 10 ASEAN countries, and Australia, Japan, New Zealand, and the Republic of Korea. India began RCEP negotiations during the Congress-led UPA rule in May 2013. It pulled out of the talks in November 2019 on the back of multiple concerns, ranging from the lack of import surge safeguards (mainly from China) to market access for Indian firms, among others.

During the RCEP summit in Bangkok in November 2019, Prime Minister Narendra Modi announced the decision to opt out of the trading block, citing the negative impact on farmers, MSMEs, and the dairy sector. Goyal, who had taken over as commerce minister in June that year and was engaged in the negotiations, shared an interesting exchange with his Chinese counterpart amid the trade talks, which brought to the fore the hard-nosed diplomatic attitude with which China negotiates with India.

“I was engaging with the Chinese minister. He was asking me, ‘Why are we worried about China? You must join RCEP. It will do good for both of us’. I said, ‘Okay, you just give me one assurance. That for every product you sell to India, you will allow us to check that the payment for that product was made entirely from the counter-party in India. And there were no two sets of payments, one going from India and one from somewhere else’,” Goyal said during a fireside chat at the India’s Best CEOs 2025 awards in Mumbai.

“Just that much assurance to make sure that the full price of the goods you are supplying to India is paid for by India, so that the customs value is also correct. And I’m ready to consider doing it. He said, ‘No, we can’t do that. You cannot check where we got the payment from.’ We were having coffee or tea. I said, ‘In India, the cost of raw material of this cup and saucer is more than the cost of the finished product, duly packed, transported to India that we get from China. How are we going to survive as a nation?’ And we decided not to do that deal,” Goyal recalled.

STRATEGIC SHIFT

There is a marked shift in India’s trade negotiation strategy. First, India is negotiating only with the developed countries and is consciously avoiding entering into talks with developing nations scouting for the same markets globally as India, as it only leads to “competitive stress” for the domestic companies.

Second, there is a more “mindful approach”, ensuring that a bilateral deal and an ensuing widening deficit with the same partner cannot co-exist. This is perhaps the biggest learning the Modi government has taken from the deals struck during the UPA regime.

Third, the deals India has recently struck have some unique or unprecedented aspects in favour of the country. If the India-Australia Economic Cooperation and Trade Agreement (ECTA) was the first agreement with a developed country after a decade, the India-U.A.E. Comprehensive Economic Partnership Agreement (CEPA) was the fastest ever conclusion of a trade deal globally. Similarly, the legally binding commitments for investments and employment in the Trade and Economic Partnership Agreement (TEPA) with the European Free Trade Association (EFTA) and tariff elimination on 99% of Indian exports to the U.K. as part of the Comprehensive Economic and Trade Agreement (CETA) are some of the key tenets that provide leverage to Indian industry and businesses.

TEPA, signed in March 2024 and effective from October 1 this year, marks the first time a binding pledge has been hardwired in a deal requiring the four-nation block (Iceland, Liechtenstein, Norway, and Switzerland) to invest $100 billion in India and create one million direct jobs in the next 15 years. This is a unique aspect in any Indian free trade agreement (FTA) so far. Even while doing so, the FTA safeguards the domestic dairy, soya, agriculture, and coal industries, while seeking to provide a significant push to Indian manufacturing and innovation.

Similarly, under CETA, tariff elimination on 99% of exports, market access for agriculture exports to the U.K., and a double contribution convention are some of the economic advantages in India’s favour. In fact, tariffs on Indian exports across 17 sectors have been brought down to nil under the India-U.K. FTA.

Additionally, India has resumed negotiations on a Bilateral Trade Agreement (BTA) with the U.S., and the India-EU FTA, too, is nearing completion. Goyal signed the terms of reference for a trade agreement with Israel during his three-day visit between November 20 and November 22. Defence, cybersecurity, agriculture, and infrastructure are the key focus areas in which both nations are expected to forge partnerships. Trade negotiations with Oman and Australia are also currently underway.

INVESTMENT OPPORTUNITIES

The current and ongoing negotiations are set to throw open the floodgates of investment opportunities for Indian companies in new geographies. “When trade increases, it has a clear-cut benefit for logistics because products are either coming in or going out. Also, once the companies try to establish some businesses here, it will help us directly. Benefits for the logistics sector will depend upon what products are really moving,” says Vineet Agarwal, MD of logistics major Transport Corporation of India.

Ester Industries, which manufactures polyester films, specialty polymers, and engineering plastic compounds, is of the view that the recently signed deals will open up significant opportunities for the company to deepen global integration across high-quality packaging, specialty polymers, and advanced material solutions. “Reduced trade barriers, improved market access, and stronger investment corridors will enhance our export competitiveness, particularly in Europe’s highly developed packaging and sustainable materials ecosystem,” says deputy CEO Vaibhav Jha.

Jha says that the company is aligning its portfolio to evolving regulatory and sustainability norms while strengthening supply-chain resilience and customer partnerships. “These agreements support our long-term strategy of expanding value-added exports and positioning Ester as a trusted global manufacturing and innovation partner,” he adds.

Anil Talreja, partner at Deloitte India, calls the recent deals wins for India. Citing the recent trade deal with the U.K., he says India’s win is having ‘zero duty’ on goods covering sectors such as engineering, gems, leather, textiles, apparels, toys and marine products. Talreja says that since these are labour-intensive sectors, this deal would lead to “increased employment opportunities in India, increase in per capita income, higher disposable income, increase in the purchasing power capacity with an ultimate result in growth of the economy and bilateral trade with the U.K.” .

Talreja explains that this will also result in significant inflow of foreign currency with its ancillary benefits. “India has been regarded as the sourcing hub for the supply of apparel, textiles for U.K.-owned corporations, and entering into this FTA would only mean an increase in these supplies,” he says.

He points out that now that India has successfully entered into FTAs with more than 14 countries, it has established its keenness to be engaged in world trade, and this also signifies the stability and predictability of doing business in India, especially considering the global geopolitical situation.

“This goes to the root of the vision of Viksit Bharat and the Make in India programme. India has sent a very strong message to the world conveying its seriousness in improving the ease of doing business,” Talreja explains.

THE WAY AHEAD

To capitalise on the opportunities arising out of the trade deals, it is now up to the domestic industry to rise to the occasion. Biswajit Dhar, trade economist and a former professor at Jawaharlal Nehru University, says Indian industry has to become more competitive and leverage the situation.

“We have to be able to take advantage of the markets that the partners are opening up, as the trading partners, too, have very efficient producers. Now, how are we going to make ourselves more competitive is the question,” says Dhar, currently a professor at the Council for Social Development.

“Developed countries have a whole range of non-tariff measures — not barriers, but standards — I would say. If we are saying we are going to become an agricultural exports hub, how much have we invested to ensure that our products meet the global standards?” asks the economist.

“So, we are looking at the tariffs and deals, but we need to focus a lot on what goes on in the backdrop in terms of quality of our products,” says Dhar.

 Now that the government has made significant strides in the area of bilateral trade agreements, throwing open new vistas of opportunity for the domestic firms, it is up to them to make the best of it. The government has held its ground in diplomatic and strategic matters in the aftermath of tough negotiations with partners. Once the U.S. and EU FTAs are stitched up, it is up to India Inc. to make the most of the trade deals.