India’s trade gap with FTA partners expands sharply in Q1 FY26: NITI Aayog

India’s trade deficit with countries that have free trade agreements (FTAs) with New Delhi widened sharply during the April–June quarter of 2025, underscoring growing import dependence even as export diversification efforts gather pace, according to a report by NITI Aayog.

The policy think tank noted that the trade gap with FTA partners increased by over 59 per cent year-on-year in the first quarter of FY26. Imports from these countries rose 10 per cent to USD 65.3 billion, while exports declined 9 per cent to USD 38.7 billion, leading to a significant deterioration in the trade balance.

The findings come as India accelerates negotiations on multiple trade agreements to broaden export markets and mitigate the impact of elevated US tariffs on Indian goods. In 2025, India concluded FTAs with Oman, New Zealand and the United Kingdom, and is currently negotiating trade deals with partners including the European Union, the United States, Australia, Bahrain, the Gulf Cooperation Council (GCC), the Eurasian Economic Union (EAEU), Canada and the Southern African Customs Union (SACU). Discussions are also underway on potential preferential trade agreements with Brazil and Israel.

Despite the widening deficit, the report highlighted a notable shift in India’s export composition. Traditional petroleum exports recorded a sharp decline, while electronics emerged as a standout performer. Electronics exports surged 47 per cent year-on-year and accounted for more than 11 per cent of India’s total exports, signalling deeper integration into global electronics supply chains.

NITI Aayog attributed part of the trade imbalance to weakening exports to the Association of Southeast Asian Nations (ASEAN). Efforts to renegotiate the existing India–ASEAN trade agreement remain inconclusive, with both sides missing the end-2025 deadline. Meanwhile, ASEAN moved ahead with an upgraded free trade agreement with China in October last year, potentially intensifying competitive pressures on Indian exporters.