Rising FTA Trade Deficit | 13 Jan 2026

Source: IE 

A NITI Aayog Trade Watch Quarterly report notes that India’s trade deficit with free trade agreement (FTA) partner countries has widened sharply, even as the country recorded strong export growth in electronics and other sunrise sectors. 

Key Findings from the NITI Aayog Report 

• Sharp Deficit Increase: India's trade deficit with FTA partners widened by 59.2% in Q1 FY26 (April and June). Exports fell 9% to USD 38.7 billion, while imports rose 10% to USD 65.3 billion. 
• Structural Export Shift: Electronics emerged as a top performer, growing 47% year-on-year (YoY), now constituting over 11% of total exports. This contrasts with a sharp decline in petroleum exports. 
• ASEAN as Key Driver of Deficit: The overall deficit was driven by a 16.9% contraction in exports to ASEAN, India's largest FTA export market. Major declines were seen in Malaysia (-39.7%) and Singapore (-13.2%). 
• Import Surge & Diversification: Imports from the UAE surged 28.7%, propelled by new imports of gold compounds and increased petroleum. Imports from China grew 16.3%, led by electronic components. 
• Geopolitical & Negotiation Context: The data is critical as India actively negotiates FTAs (e.g., EU, US) and has recently concluded pacts with Oman, New Zealand, and the UK (2025). It also follows a missed 2025 deadline to re-negotiate the ASEAN FTA.