India is on a free trade agreement spree. This week, the prime minister, Narendra Modi, got on a telephone call with his New Zealand counterpart, Christopher Luxon, to conclude an FTA between the two nations. The week before, Modi was in Oman, where New Delhi and Muscat agreed to a free trade pact. And in the summer, India and the United Kingdom announced their FTA, capped by a visit to London by Modi.
That is not all. During the visit by the Russian president, Vladimir Putin, earlier in December, the two countries signed deals making it easier for Indian workers to find jobs in Russia. India is trying to push for a free trade deal with the Eurasian Economic Union — a bloc consisting of Russia, Belarus, Kazakhstan, Kyrgyzstan and Armenia. On October 1, an FTA that India has signed last year with the European Free Trade Association — Switzerland, Norway, Iceland and Leichtenstein — came into effect. India is also in trade talks with a range of other countries, from Canada to Chile. The Union commerce minister, Piyush Goyal, is poised to visit Brussels soon as India and the European Union try to expedite their FTA negotiations. That is a big turnaround for a country that for years, under successive governments, including the current one, has struggled to close trade deals. The India-EU talks over an FTA, for instance, began in June 2007 — more than 18 years ago.
So what has changed?
The answer lies not only in economics but in geopolitics. While the UK is a major trading partner, New Zealand and Oman are not. Nor are Belarus or Armenia massive markets that Indian industries are desperate for access to. But these rapid FTA announcements and attempts to inject momentum into deals under negotiation coincide with a difficult battle that India is waging against the president of the United States of America, Donald Trump. Trump has, over the course of his political career, repeatedly accused India of unfair trade practices, citing New Delhi’s high tariff barriers. This year, in the first few months of his second term, he has ruthlessly attacked Indian goods with 50% tariffs. The US has been, for several years, India’s largest export market and Trump has been trying to make New Delhi bend on key demands in a free trade deal currently under negotiation.
India, no doubt, needs a ceasefire in the trade war with the US. But Modi has also promised that he will not concede on India’s long-standing protections for domestic farmers, worried about being swamped with cheap, mass-produced American agro products. India and the US had set the end of the year as a deadline to seal their FTA. That looks unlikely, and India should brace for fresh threats or tariffs from Trump. He has already indicated, in recent days, that he is upset about Indian rice coming into the US.
Against that backdrop, the slew of FTAs that India has struck or is negotiating, strengthening its position. They show the world that India is on the move when it comes to signing on to balanced deals, so if talks with the US are stuck, it is perhaps not India that is to blame. By sticking to its guns on agriculture with the UK and New Zealand — both with agro industries of their own — India is also giving the US and the EU a template for how deals could be reached. And by seeking FTAs with both Western partners and countries closer to Russia, New Delhi is demonstrating that it has friends in every part of the world.
Data from November shows that despite the Trump tariffs, Indian exports to the US are growing. Indian goods are also overall more in demand globally, the numbers reveal, as industries look to diversify to markets other than the US — their competitive pricing certainly helps.
It would be naive for India to believe that it doesn’t need the US as a market. But by demonstrating that it can withstand American tariffs, India is speaking to Trump in a language that he understands. In November, he lowered tariffs against many Brazilian products because the levies were only raising costs for American consumers without hurting Brazil. With the recent FTAs, India is telling Trump clearly that on trade, the ball is entirely in his court.
Charu Sudan Kasturi is a journalist who specialises in foreign policy and international relations