Enhancing India's Trade Competitiveness through Inclusive Liberalisation

Rajat Kathuria and Neha Gupta

No DP-2025-10, Working Papers from Economic Research Institute for ASEAN and East Asia (ERIA)

Abstract: Two decades after India began pursuing trade liberalisation through Free Trade Agreements (FTAs) and Regional Trade Agreements (RTAs), the country remains divided over their economic value and strategic implications. India now stands at a crossroads: whether to deepen engagement with mega-regional trade frameworks such as the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), or to continue a cautious, selective approach. This paper examines India's trade performance with existing agreement partners – particularly ASEAN – to reassess prevailing concerns around trade deficits and competitiveness. The analysis shows that India's trade deficits are often overstated and misunderstood. Much of the deficit reflects increased imports of intermediate goods, which can enhance export competitiveness by strengthening forward and backward linkages in regional value chains. India has maintained trade surpluses with several FTA partners, including within ASEAN, and its intermediate goods exports to East Asia have recently increased. Simulation results using the World Integrated Trade Solution's SMART model suggest that RCEP membership could significantly raise India’s imports, largely driven by China, while CPTPP participation would generate more balanced trade effects, with potential export gains to markets such as Mexico, Canada, and Australia. Beyond trade flows, the paper argues that selective engagement with mega-regional agreements – particularly the CPTPP – can serve as a policy anchor for improving India's business environment, regulatory coherence, and investment climate. The study proposes a framework for inclusive liberalisation that combines calibrated trade openness with domestic reforms, adjustment safeguards, and sequencing, enabling India to enhance competitiveness while managing distributional and structural risks.

Keywords: Trade Agreements; RCEP; CPTPP; India and ASEAN; Trade Deficit; India and CPTPP; RTAs; India’s exports; SMART Simulation (search for similar items in EconPapers)
JEL-codes: F13 F14 F15 F17 F53 O19 (search for similar items in EconPapers)
Date: 2026-01-08
New Economics Papers: this item is included in nep-sea
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