By Biswajit Dhar, Distinguished professor, Council for Social Development, New Delhi
As free trade agreements (FTAs) with Oman and New Zealand were concluded in the last fortnight of 2025, India rang out a year which was by far the most engaging for the country’s trade negotiators. Besides the two recently concluded FTAs, the agreement with the UK was inked during the year, while the FTA with the European Free Trade Association (EFTA) entered the implementation phase. The year saw India engaged in intense negotiations with its two largest partners, the US and the EU. Although expectations ran high that these FTAs would be concluded in 2025, several contentious issues, especially opening India’s agricultural market, caused a logjam in the negotiations. Yet another significant decision was the one taken at the end of President Vladimir Putin’s visit to New Delhi that India and the Eurasian Economic Union would engage in FTA negotiations covering sectors of mutual interest.
The importance of bilateral FTAs has considerably increased after President Donald Trump’s second coming on two counts. First, global trade rules overseen by the World Trade Organization are in serious jeopardy after Trump decided to script his own trade rules. Back in the late 1940s, the global community recognised that businesses thrive when predictable rules are in place and they therefore crafted the rules-based trading system. With the multilateral system in disarray, bilateral trade agreements have emerged as the sole option for setting trade rules. Countries are hence engaged in crafting trade rules with their chosen partners to support global trade. India too is walking down this path to promote its interests.
A second, and perhaps a more important reason for India to engage in bilateral FTAs is to diversify its export destinations. Over the past decade, Indian exporters have increasingly become dependent on the US. In 2014-15, the US accounted for less than 14% of India’s exports, but by the first half of 2025, this figure increased to nearly 23%. With Trump’s tariff war against India unlikely to end soon, diversification of India’s export destinations has become an imperative like never before. Unlike China, which systematically explored markets in every region as a part of its global integration efforts, India has mostly been dependent on larger economies, including those with large concentrations of Indian diaspora. Trump’s affront should be a wake-up call, and initiatives to expand India’s footprint in global markets through the bilateral FTAs should therefore be considered as a step in the right direction.
The India-Oman Comprehensive Economic Partnership Agreement (CEPA) offers considerable opportunities for Indian businesses. Oman agreed to eliminate tariffs levied on 87% of its tariff lines and since 11% of Omani tariff lines are already duty-free, India’s businesses would enjoy such access for 98% of tariff lines. In the services sector, Oman has taken commitments across a broad spectrum of sectors, including computer related services, business and professional services, audio-visual services, research and development, education, and health services, benefiting Indian service providers. A key feature of this agreement is the sizeable increase in temporary employment opportunities for Indians in Oman under Mode 4 market access.
India’s CEPA with Oman—its second bilateral trade agreement with a trade partner in the Gulf region after the United Arab Emirates—may not contribute much to India’s quest to diversify its exports, given Oman’s nominal share in global merchandise and services imports (around 0.2%). However, this agreement has immense significance as it enhances India’s presence in a strategically important region. Moreover, India’s larger objective is to forge a comprehensive agreement with the Gulf Cooperation Council. Its CEPA with Oman should be seen as an important step towards accomplishing this objective.
The contentious issue of opening India’s dairy market was the main sticking point in its long-drawn FTA negotiations with New Zealand. Though India refused to lower tariffs on dairy products, the India-New Zealand FTA appears to have come through with India accepting two commitments pertaining to this sector. First, India has agreed to implement a “fast-track mechanism” to facilitate duty-free imports of New Zealand dairy products for further processing and export.
This would create new opportunities for New Zealand exporters in India’s supply chains, including into its FTA partners. Secondly, India has committed that should it open its dairy market to other countries in the future, it would extend similar treatment to New Zealand dairy industry as well. The latter commitment in particular could open a pandora’s box, as both the US and the EU have been demanding that India must lower tariffs on dairy products.
New Zealand has low average tariffs (1.9% in 2024) but it also has peak tariffs in several sectors, including those of India’s export interest. This includes 45% on garments and 10% on electronic products, chemicals, and leather products. India’s exports in these sectors should benefit from the lower tariffs that would soon be in place.
Services trade between India and New Zealand should also expand, following extensive commitments for opening their respective service sectors. New Zealand has agreed to provide 1,667 three-year temporary employment entry visas annually (capped at a maximum of 5,000 at any point in time) to Indian professionals in skilled occupations. However, this number is less than 6% of the average number of total skilled visas New Zealand issues each year.
While the newly-inked FTAs provide opportunities for expanding India’s exports of goods and services, they also require the partner countries to ensure that their labour laws are in conformity with the Core Conventions of the International Labour Organization. However, for India, which is implementing the new labour codes that have made labour market more flexible, implementing these FTAs could be challenging
