India's FTAs Fall Short Against US Tariffs

Barclays economists have cautioned that India's recent surge in free-trade agreements might not sufficiently mitigate the economic fallout from US tariffs on its exports. India, a major economy, notably lacks a trade deal with the US, subjecting its exports to some of the world's highest tariff rates. These levies have severely impacted labor-intensive industries such as textiles, handicrafts, and leather goods.

The absence of a US trade agreement creates uncertainty, straining the Indian rupee and prompting the government to allocate $5 billion to support exporters. This situation has intensified India's focus on negotiating trade pacts with other partners like the European Union, aiming to reduce trade barriers and project a more open economic image.

Economists note that even newly signed agreements, such as those with Oman and New Zealand, may not provide substantial export growth due to their relatively smaller trade volumes compared to the US market. The effectiveness of these agreements will be judged by their ability to translate into tangible export gains and bolster India's industrial base.