The year 2025 emerged as a watershed moment for India's international trade, defined by a bold dual strategy: aggressively pursuing new free trade agreements (FTAs) while simultaneously weathering a significant tariff storm from the United States. Against a global backdrop of protectionist sentiment and slowing demand, New Delhi secured landmark deals and advanced critical negotiations, signaling a strategic pivot in its economic diplomacy.
A Year of Deals Amid Global Turbulence
India's trade policy unfolded under considerable pressure. The inauguration of Donald Trump on 20 January 2025 revived protectionist currents in the US. By late July, Washington announced a 25% tariff on Indian imports, effective 7 August. This was followed by an additional 25% penalty tariff linked to India's continued purchase of Russian oil. From 27 August, the combined burden reached 50% on many Indian products.
Despite this headwind, India executed an assertive FTA push. On 24 July 2025, it signed a landmark trade agreement with the United Kingdom. This was followed in December by a Comprehensive Economic Partnership Agreement (CEPA) with Oman, signed on 18 December. Furthermore, India successfully concluded negotiations with New Zealand on 22 December. Signing two major FTAs and concluding a third in a single year marked a departure from India's traditionally cautious approach to trade liberalization.
Decoding the Key Agreements and Their Impact
The UK-India FTA stands as one of London's most comprehensive post-Brexit pacts in the Indo-Pacific. It provides for the elimination of tariffs on 99% of Indian exports, granting zero-duty access for textiles, footwear, cars, and marine goods that previously faced duties of 4-16%. In return, India agreed to lower duties on select UK luxury goods like Scotch whisky and premium cars.
The Oman CEPA, India's second deep trade pact with a Gulf nation after the UAE, is strategically significant. Oman offered zero-duty access on over 98% of its tariff lines, covering more than 99% of India's exports by value. India liberalized nearly 78% of its lines while protecting sensitive sectors like dairy and jewellery. Labour-intensive sectors such as textiles, leather, pharmaceuticals, and automobiles are poised to benefit immensely.
The concluded talks with New Zealand open fresh export avenues. In 2024-25, New Zealand imported only $711 million worth of goods from India, against total imports of about $50 billion. This gap, especially in processed foods and pharmaceuticals, indicates substantial room for FTA-led growth. "For India, the challenge now is to pair the FTA with targeted export promotion, standards cooperation, regulatory facilitation, and logistics support," noted Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI).
Resilience, Strategy, and the Road Ahead
Remarkably, India's trade proved resilient. Merchandise exports for April-November 2025-26 stood at $292.07 billion, up from $284.60 billion a year earlier. Exports to the US initially dipped after the steep August tariffs, falling to $5.5 billion in September. However, they recovered to $6.9 billion by November, showing exporters' adaptation.
"Even in a challenging global trade environment, India's approach in 2025 shows a clear shift towards securing long-term market access through FTAs while managing short-term tariff pressures," said Abhash Kumar, a trade economist and assistant professor at Delhi University.
Beyond signed deals, India advanced negotiations with the European Union, progressed talks with the US on a tariff framework, and revived discussions with Qatar and Canada. This reflects a deliberate strategy to diversify trade partners. The groundwork of 2025 sets the stage for future growth. "India's current trade strategy is likely to have a strongly positive impact over the long term," said Amit Singh, associate professor at JNU's Special Centre for National Security Studies, positioning India as a more central global economic player by 2047.
