Why is it in news?
- NITI Aayog’s ‘Trade Watch Quarterly’ report (Jan 2026) finds that India’s trade deficit with FTA partner countries has widened sharply, rising 59.2% between April–June 2025 compared to the previous year — even as electronics exports grew strongly.
- The report comes at a time when India is expanding FTA negotiations with the EU, U.S., Australia, EAEU, GCC, Canada, SACU, and exploring new PTAs with Brazil and Israel, raising questions about trade imbalances and sectoral competitiveness under FTAs.
Relevance
- GS-3 | Economy — External Sector, FTAs, Trade Balance, Manufacturing Competitiveness
Facts & Data — Trade Deficit with FTA Partners
- Trade deficit growth (Apr–Jun 2025): +59.2% YoY
- Drivers of widening deficit
- Petroleum imports up, due to higher crude prices and volumes
- Weak export growth in several sectors
- Stronger import demand from FTA partners
- Countries contributing to deficit trends
- ASEAN, South Korea, Japan, Thailand, UAE — rising import bills
- Some FTA partners saw export declines (e.g., Singapore −13.3%, Australia −8.7%, Saudi Arabia −8.5%)
Sectoral Performance
- Electronics — strong export surge
- Became 2nd-largest export sector
- 47% YoY growth in Apr–Jun 2025
- Export gains driven by:
- Mobile phones, electronic circuits, components
- Petroleum & commodities — deficit pressure
- Gold imports from UAE increased sharply
- Petroleum oils & bituminous minerals up
- Iraq and Russia remain key crude suppliers; import values rose
Geography-wise Trends
- Rising imports from
- UAE (+28.7%)
- China (+16.8%)
- USA (+16.9%)
- Export growth markets
- South Korea (+15.6%)
- Japan (+2.8%)
- Thailand (+2.9%)
- Bhutan (+10.2%)
- Declining export markets
- Singapore, Australia, Saudi Arabia — contraction noted
Policy Context
- India signed FTAs with UAE & Australia (2022), UK & EFTA under discussion, ASEAN review pending
- Report flags:
- Structural export weakness outside electronics
- High import dependence in fuels, gold, intermediates
- Need for sector-specific competitiveness & supply-chain depth
Significance
- Highlights a pattern seen in past FTAs — imports rise faster than exports unless domestic industry upgrades capacity & value-addition.
- Suggests that electronics PLI-led gains are promising but broad-based export strength is still lacking.
- Signals the need to align FTA strategy with industrial policy, RoO enforcement, and trade-deficit risk management.
