China’s non-tariff barriers expose limits of India’s FTA push: India has signed a succession of free trade agreements in the hope of expanding exports, but access to foreign markets remains difficult even for industries in which the country has an established competitive advantage. Imports from several trading partners have grown faster than Indian exports, adding to trade deficits and raising questions about the benefits of preferential trade arrangements. Lower tariffs are of limited use when regulatory restrictions prevent exporters from selling their products. The government needs to pay greater attention to whether the market access negotiated under trade agreements translates into actual business.
The problem is particularly evident in India’s trade with China. The bilateral trade deficit more than doubled from $52.7 billion in FY16 to $112 billion in FY26. Finance Minister Nirmala Sitharaman, speaking on October 16, identified non-tariff barriers as a major obstacle to Indian exports, citing China’s restrictions on pharmaceuticals, agricultural products and bovine meat. New Delhi has raised these concerns with Beijing for nearly a decade, with limited success.
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China’s non-tariff barriers restrict Indian exports
Tariffs are the most visible impediment to international trade. By raising the landed price of imported goods, they provide domestic producers with an advantage over foreign competitors. Reducing these duties is consequently a central objective of trade negotiations.
Non-tariff barriers are more difficult to address. They include product certification, import licensing, customs procedures and technical standards. Sanitary and phytosanitary regulations governing food safety and animal and plant health serve legitimate public purposes. Problems arise when such requirements are discriminatory, unnecessarily restrictive or administered in ways that impose unreasonable costs on foreign suppliers. The World Trade Organisation’s rules on technical barriers recognise governments’ right to regulate while seeking to prevent unnecessary obstacles to trade.
India’s difficulties with China illustrate the economic consequences. Pharmaceutical exports depend on regulatory approvals, inspections and recognition of manufacturing standards. Agricultural and animal products are subject to additional requirements concerning disease control and food safety. Indian producers may have the capacity to supply these markets, but obtaining permission to sell can be a lengthy and expensive process.
For an exporter, a tariff concession has little commercial value if the product cannot be registered or cleared for sale. Delays in regulatory approval impose costs even on companies whose products meet international standards. Smaller exporters, with fewer resources to navigate foreign regulatory systems, are particularly disadvantaged.
The pharmaceutical industry provides a measure of the opportunity being missed. According to NITI Aayog’s Trade Watch, China’s pharmaceutical import demand reached an estimated $40.4 billion in 2025, while India accounted for just 0.2% of that market. Indian pharmaceutical exports to China declined 11.54% in FY26 to $287.42 million.
Regulatory restrictions are part of the explanation, although competition from Chinese manufacturers and domestic procurement preferences also influence market outcomes. The figures nevertheless point to India’s limited presence in a major pharmaceutical market despite its substantial export capabilities.
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Negotiating market access with China
New Delhi has preferred negotiations to retaliation, an approach that makes economic sense. China is an important supplier of electronic components, machinery, chemicals and other industrial inputs used by Indian manufacturers. Restrictions on these imports could raise domestic production costs, particularly where alternative suppliers are unavailable or more expensive. Such measures could ultimately undermine the competitiveness of Indian exports.
There is, however, a cost to prolonged negotiations that produce few results. India needs to make market-access discussions more specific and their outcomes measurable. The commerce ministry, export promotion councils and industry associations should identify products facing regulatory restrictions, document the approvals being withheld or delayed, and seek commitments on resolving individual cases. Progress can then be assessed against actual market entry and export performance rather than the frequency of bilateral consultations.
Where regulations appear discriminatory or lack a defensible scientific basis, India should consider raising specific trade concerns through WTO committees and, where justified, pursuing formal dispute settlement. The WTO Agreement on Sanitary and Phytosanitary Measures provides a framework for examining restrictions affecting agricultural and food products. Such action requires evidence that particular measures are inconsistent with trade obligations; an unfavourable trade balance alone provides no basis for a complaint.
India’s ASEAN trade deficit
India’s experience with the Association of Southeast Asian Nations raises a related question about the effectiveness of free trade agreements. Sitharaman has called for a review of the India-ASEAN trade arrangement, arguing that its benefits have been disproportionately favourable to the Southeast Asian bloc.
India’s merchandise trade deficit with ASEAN exceeded $50 billion in 2025, compared with a little over $5 billion in 2009, before the trade-in-goods agreement came into force in January 2010. The sharp increase has strengthened demands for a reassessment of tariff concessions and the opportunities available to Indian exporters. Negotiations to review the agreement have continued after missing an earlier deadline.
An evaluation published in the Journal of Policy Modelling in 2016 found that India’s trade balance with ASEAN had deteriorated and that tariff reductions showed only a weak correspondence with trade expansion. The study also examined the effects of the global economic slowdown, an important qualification when attributing changes in trade performance to the agreement itself.
Trade deficits do not necessarily demonstrate that an agreement has failed. Imports may include machinery, raw materials and intermediate goods that make domestic production more efficient and support exports to other markets. Differences in industrial competitiveness, domestic demand and production costs also influence bilateral trade balances. These factors need to be separated from the effects of tariff concessions before drawing conclusions about an agreement’s benefits.
There is nevertheless a legitimate concern about the relationship between India’s trade policy and its manufacturing ambitions. The government wants domestic production to expand under Make in India, but preferential imports can expose Indian manufacturers to stronger competition, particularly where they face higher input costs or other structural disadvantages. Indian firms may simultaneously struggle to take advantage of export opportunities because of regulatory restrictions and weaknesses in their own competitiveness.
The review of the ASEAN agreement should therefore examine individual sectors rather than treat the aggregate trade deficit as the principal measure of success. It should establish where tariff concessions have benefited Indian producers through cheaper inputs, where domestic industries have lost market share, and whether Indian exporters face identifiable barriers in partner countries. Trade imbalances warrant investigation, but reversing them through import restrictions is not necessarily sound trade policy.
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Benefits of India’s free trade agreements
India’s expanding network of trade agreements makes these questions more pressing. Agreements with the United Arab Emirates and Australia are already in operation, while India has concluded negotiations with the European Union and signed an agreement with New Zealand, which is scheduled to enter into force on October 20. The government sees these arrangements as a means of diversifying export markets and strengthening India’s position in international trade.
Yet agreements cannot compensate for weaknesses in domestic manufacturing or guarantee that foreign regulators will approve Indian products. Export performance also depends on production costs, reliability, quality and the ability of firms to compete with established suppliers. Preferential tariffs improve the terms of competition; they do not determine its outcome.
The government should make post-agreement assessments a regular part of trade policy, examining export growth at the product level, the utilisation of tariff preferences and the regulatory obstacles that remain unresolved. These assessments would also provide a better basis for future negotiations by showing which provisions have delivered commercial benefits and which have proved ineffective.
India has good reasons to pursue trade agreements and to avoid an indiscriminate resort to protectionism. But its growing network of agreements will justify itself only if Indian businesses can make effective use of the access negotiated on their behalf. The more demanding test of trade policy is whether exporters can enter foreign markets, compete successfully and expand production at home.