2026 definitely begins on an upbeat note for India’s trade strategy, which has weathered adverse headwinds due to the tariff disruption of US President Donald Trump. The search for alternative markets through more free trade agreements (FTAs) will gather pace this year, including prospects for a big-ticket trade deal with the European Union by end-January and the US in the first quarter. The conclusion of negotiations with New Zealand was in fact the seventh FTA since the ruling dispensation assumed office in 2014. India has so far concluded 18 FTAs and the only major trade partner that is out of the web of such deals is China.
There is an interesting suggestion in this regard that once the deal with New Zealand comes into effect this year, India would have FTAs with members of the Regional Comprehensive Economic Partnership (RCEP) minus China. The RCEP comprises the Association of Southeast Asian Nations (ASEAN), South Korea, Japan, Australia, New Zealand, and China. RCEP minus China thus offers immense benefits to India in opening up trading opportunities without the risks of dealing with the dragon.
Great Encirclement
How feasible is engaging with RCEP minus China? No doubt, India will have greater comfort levels with such a prospect but it is a tad premature to uncork the bubbly. Seven years ago, India walked out from joining this grouping at literally the eleventh hour, citing unmet “significant outstanding issues”. These were related to fears of a surge in Chinese imports and apprehensions that the dragon would dump its goods through other countries.
India’s reluctance to be a part of a Sino-centric-RCEP was also reflected in its ambivalence regarding its FTA with ASEAN as it registered persistent deficits amounting to $21 billion this fiscal till August. ASEAN, in turn, remains China’s largest trading partner—registering a massive bilateral deficit of $245.2 billion this year till November—that is deeply integrated with its supply chains. Not surprisingly, India is reviewing this deal given its aversion to FTAs that are “trade deals with China by stealth”. India also has imbalances with other RCEP members like South Korea, Japan, and Australia and is reviewing its comprehensive economic partnership agreement with South Korea.
While India might have strategically put together the building blocks of RCEP minus China, it is largely its economic cooperation and trade agreement with Australia and FTA with New Zealand that really provide the upside on the trade front. Over the past three years, this agreement with Australia has delivered sustained export growth for India. Starting January, 100% of Australian tariff lines will be zero-duty for our exports. The New Zealand deal similarly allows 100% duty-free exports. Both agreements also include possibilities of major gains in bilateral services trade, including mobility of our professionals and students to these countries. These deals should ideally be the model for the many other FTAs that India will later ink this year.
CPTPP Horizon
India’s closer engagement with Australia and New Zealand indeed is a crucial element of its evolving outreach to the bustling India-Pacific region. Both nations are also members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). So, too, are four ASEAN members. Considering India’s reluctance to be a part of any trading architecture led by China, it makes much more strategic sense if India uses the template of its deals with RCEP members to consider joining the CPTPP in the future.