Bunch of BTAs may harm?

 

Is it 'premature' to keep the gates wide open?

India has entered into bilateral trade agreements (BTAs) with several countries, including the one that is described as the ‘Mother of all the deals” with the European Union (EU). It is all set to wrap up the deal, with a formal interim agreement, with US in Mar' 26. (Terms of reference outlined in the US-India joint statement). Though India is now the fourth largest economy in the world, in terms of nominal GDP, I was wondering whether the time has really arrived for India to enter into multiple BTAs, one followed by another, in quick succession. Is paving the way for unlimited merchandise exports and imports, the right way to go forward, as we are still a trade and current account balance 'deficit' country. The following table, as culled out from  the economic survey 2025-26, convey the persistent issues. 

(USD in billion)
Parameters	2014-15	2023-24	2024-25	Growth over 2014-15 (%)	Growth over 2023-24 (%)
Imports	461	686	729	58	6
Exports	316	441	442	40	0.2
Trade Balance	-145	-245	-287	98	17
Invisibles Net	118	219	264	124	20
Current  Account Deficit	-27	-26	-23	15	12
Foreign Investments Net	73	54	5	-94	-91
Loans Net $	2	7	29	1350	315
Banking*	12	41	-10	-183	-125
Others	1	-12	-6	-700	50
Total Capital	88	90	18	-79	-80
Overall Balance	61	64	-5	-109	-108
$ mainly ECB	*mainly NRI

 

Comments: As compared to 2014-15 levels, while exports grew by 40%, the imports grew by 58% in 2024-25. In absolute numbers, the increase in exports during the said period was USD 126 billion, whereas the increase in imports had gone up substantially to  USD 268 billion. The percentage of exports to total imports declined from 68.5% in 2014-15 to 60.6% in 2024-25.  The impact of the difference between exports and imports is well conveyed, if one looks at the trade deficit between 2014-15 and 2024-25. The growth in invisibles, mainly contributed by the substantial exports through software services, helped us all through, to keep the current account deficit at manageable levels. The capital account comprise (i) foreign investment (significant and volatile) (ii) external commercial borrowings (small and steady) and (iii) NRI remittances (marked by good and steady inflows). The above table shows that the overall balance turned positive only in the years, where we had huge capital account balances.

Comparison of the world's two largest economies: The growth stories of the top two economies in the world viz. USA and China are contrast in nature.

China: Since its reforms in 1980s, the average surplus in trade balance of China is USD18.2 billion per month (from 1981 to 2025). It recorded a negative trade balance of USD 62 billion in Feb’ 20. Barring that brief period of COVID, the trade balance is on the rise and was at USD 114 billion in Dec’ 25. For the entire year 2025, the surplus was USD 1.189 trillion. 

USA: US is a trade deficit country since 1976 and its trade deficit widened to nearly USD 1 trillion in 2022. The trade deficit, as recorded for the month of Nov' 25, was USD 56.9 billion. Since its currency is still the settlement currency for majority of the international transactions across the globe, US has better bargaining power in trade negotiations. The country used the dominant position of its currency to its advantage by importing efficiently produced intermediate/finished goods from countries having cheap labour, low cost of production, procurement and manufacturing.

Issues arising out of BTAs: Any bilateral agreement between two countries permits unlimited export and import opportunities, with well defined controls to protect the local economy. The following are the issues that should be addressed. 

1. 'Make in India' is different from 'Made in India' in the context that the former include a large part of imported goods assembled and sold in India, while the latter accounts for majority of the products manufactured/produced in India. Under the brand ‘make in India’, the imports, which will not be re-exported is likely to be higher. Hence the BTAs, even if they concentrate on 'make in India' concept, will push the trade deficit further.

2. The size of our population brings both advantages and disadvantages. While we have a demography dividend, the trade deals are entered into by the other countries with the sole aim to pile up their consumer goods/durables in India, than investing in labour intensive sectors/infrastructure. This, apart from increasing our trade deficit, pose threats to our existing manufacturing units. The trade deficit with China is more than USD 100 billion and most of the items imported are finished goods sold direct to the consumers. 

3. Unless we become a trade surplus country, at least in the medium term, the bilateral deals may bring in more threat to our economy than opportunities. Removing/reducing tariff may help the existing businesses to sustain their present level of exports. Increase in exports by the existing businesses or entering into an export arena by the new units in India depends not only on tariffs, which is a minuscule consideration in promoting exports. The quality of goods manufactured, the cost of manufacturing, the ex-tariff price at which the product is offered by our competitors, the total installed capacity in making the product (which indicates volumes of production and building up infrastructure), the domestic price for the said product (sugar, cotton, rice, wheat are sold more in India as export price is less than the cost of production/the domestic price) are the major factors that determine the export competitiveness of our products. Hence along with promoting bilateral deals, the government's fiscal policy should address the above aspects, so as to make our country a trade surplus country.

Joint Statement by the US and India has few gaps: 

a.  Apart from the tariff applications’ on goods exported/imported, both the countries commit themselves to provide each other a preferential market access in sectors of respective interest on a sustained basis. US or any other country for that matter are interested in India as they see a huge consumer market not only in durables but in finance, real estate, transport, defence, railways/ other infrastructure, agriculture/food, etc. Unless the 'red lines' sectors (as phrased by the Union Commerce Minister in his interview with the media) particularly, the sensitive items in agriculture, are clearly excluded in permitting market access to US, while arriving at the interim agreement expected in Mar' 26, ambiguity will remain for exploration by the US in future.

b. The interim agreement should include all the executive orders passed on both the sides, till the date of the agreement to ensure that the important aspects of the agreement are in alignment with the  executive orders issued by the respective countries. For example, the separate executive order passed by the President of US mentioning that the tariffs will be reviewed, if India do not stop purchase of oil from Russia, apart from encroaching on the sovereign and independent rights of India in freely deciding its international trades, poses uncertainty in the minds of both Indian exporters and US importers. A new risk cover may have to be offered by some insurer under 'force majeure' 

c.   Additional tariff reduced to 18% may not translate into resumption of orders for Indian exporters, as the levy is still high. The US importers might have already shifted their orders to other countries/local suppliers. In order to win them back, the Indian exporters may be compelled to quote at least the same/reduced price (of the last order executed) resulting in less revenue and profit margin. Ideally, “status quo” (no added duty) should have been restored to those sectors, where Indian exporters had a significant share of US imports.

d.  As of now, India imports roughly USD 45 billion worth of goods/services a year. ‘Intending to buy/purchase’ USD 500 billon of energy products, aircraft and aircraft parts, coking coal etc. over a five year period is ambiguous. Whether we will be shifting the orders from our existing trade partners like Russia, France, UAE or the new purchases will be over and above the existing purchases. Important PSUs are involved in production/consumption of the above products and if the government is anxious to fulfill its promise, undue pressure on the said PSUs cannot be ruled out. 

e.  The impression created that the ‘buck’ is being passed on to the other ministry could have been well avoided, had the Union Commerce Minister and MEA chose to address the press meet jointly.

  To conclude, in view of the volatile nature of financial assets flowing through the capital account, Indian Rupee is not yet made fully convertible, with a set of rules and regulations governing the capital account. USA (i) having the largest financial system in the world @ and (ii) with its currency being the settlement currency for a majority of international transactions, across the globe, can continue to thrive even though it is still a ‘trade deficit’ country and its external borrowings are quite high. Can India afford to be another USA and permit unlimited exchange of trade with every other country, as the merchandise exports are even now much less than the merchandise imports?

By converting ‘luxury’ into ‘essential’ in the mind of a common Indian through increased spending habits, lured by easy loans, are we losing the “high household savings” tag unique to India?The other countries of the world are looking at India with interest, not only due to we being the fourth largest economy, but also due to India having a large population, above the poverty line, that can absorb the consumer goods produced in their countries.  If not planned properly, we run the risk of becoming a dumping yard for the products of other nations. The apprehension is - Is India going global, when others are protecting their 'national interest'? Future will provide the answer

Regards

V.Viswanathan

CGM Retd.,e-SBT

    18th February 2026.

   @with total assets across banks, mutual funds and insurance companies exceeding USD 79 trillion as of late 2024.