Indiaʼs Push for Free Trade Agreements: What MSMEs Need to Know

India has been actively pursuing Free Trade Agreements (FTAs) to enhance its global trade presence, with significant implications for Micro, Small, and Medium Enterprises (MSMEs). As of 2025, India has signed 13 FTAs and six Preferential Trade Agreements (PTAs), with ongoing negotiations with major economies like the UK, EU, GCC, and Canada. Here’s what MSMEs need to know about these agreements and how they can benefit:

Key Benefits for MSMEs

• Lower Tariffs: FTAs reduce or eliminate tariffs on exports, lowering costs and improving price competitiveness in international markets. This makes Indian products more attractive to foreign buyers.

• Easier Market Access: By reducing trade barriers, FTAs provide MSMEs with easier entry into global markets, expanding their customer base and revenue streams.

• Simplified Regulations: FTAs streamline customs processes and reduce paperwork, facilitating faster clearance of goods and services. This efficiency saves time and resources for MSMEs.

• Raw Material Cost Reduction: Cheaper imports of raw materials due to reduced tariffs can lower production costs for MSMEs, enhancing their profitability and competitiveness.

Impact So Far and Future Prospects

• MSME Contribution to Exports: MSMEs already contribute significantly to India’s exports, accounting for about 45% of the total. FTAs can amplify this share by providing better market access and reducing trade costs.

• Success Stories: For instance, India’s FTA with the UAE boosted exports by 20% in 2023, demonstrating the potential of these agreements to drive growth.

• Future Growth: With the expansion of FTAs, India aims to reach $500 billion in total exports by 2030. This ambitious target highlights the critical role FTAs will play in enhancing India’s export capabilities.

Ongoing Negotiations and Opportunities

• UK, EU, GCC, and Canada: Ongoing negotiations with these major economies offer MSMEs the potential to tap into large, lucrative markets. Successful agreements could significantly increase exports and diversify India’s trade partners.

• Africa, Latin America, and Southeast Asia: India is also exploring FTAs with countries in these regions, providing MSMEs with opportunities to expand into emerging markets.

Challenges and Strategies for MSMEs

• Capacity Building: Participating in skill development programs and cluster initiatives can enhance MSMEs' competitiveness.

• Market Diversification: Expanding into new markets through FTAs can reduce reliance on traditional export destinations, improving economic stability.

• Leveraging Government Support: Utilizing government initiatives, such as financial incentives and streamlined regulatory processes, can help MSMEs capitalize on FTA benefits.

In Summary

India’s push for FTAs presents MSMEs with opportunities to enhance their global presence, reduce costs, and increase exports. By understanding these agreements and leveraging government support, MSMEs can play a pivotal role in driving India’s export growth and economic development.

Sources:

1. https://pib.gov.in/PressReleasePage.aspx?PRID=1814151

2. https://www.india-briefing.com/news/indias-fta-updates-2025-36271.html/

3. https://protium.co.in/indias-msmes-poised-to-drive-45-of-exports-in-fy-2025/

4. https://www.weforum.org/stories/2025/03/eu-india-free-trade-agreement/

5. https://www.business-standard.com/industry/sme/msmes-getting-greater-attention-in-free-trade-agreements-govt-official-123112301208_1.html

6. https://indusresearch.in/role-of-indias-ftas-to-boost-sme-exports-by-mr-guru-sowle/

7. https://www.financialexpress.com/business/sme-explained-the-role-of-indias-free-trade-agreements-in-boosting-msme-exports-3259133/