India’s Trade Deal Push Faces Rising Concerns Over FDI and Widening…

Sarah J · 2026-04-02T16:46:50.000Z

India is rapidly expanding its network of global trade agreements, positioning itself as a key player in international commerce, but growing concerns around foreign direct investment (FDI) flows and widening trade deficits are raising questions about the sustainability of this strategy. In recent months, India has accelerated negotiations and closures of major free trade agreements with key partners including the European Union, the United Kingdom, and the United States, aiming to boost exports and strengthen its position in global supply chains. These agreements are expected to open new markets, reduce tariffs, and enhance competitiveness for Indian industries. However, this aggressive trade push is unfolding against a challenging macroeconomic backdrop. India’s merchandise trade deficit surged sharply to $27.1 billion in February 2026, nearly doubling compared to the previous year, driven by strong import growth and relatively weak export performance. At the same time, trends in investment flows indicate caution. Outbound FDI has declined significantly, reflecting growing uncertainty among Indian companies amid global volatility, while foreign portfolio investments have also shown signs of weakening. These developments highlight a disconnect between trade ambitions and capital movement dynamics, raising concerns about whether new trade deals will translate into sustained investment inflows. Additionally, broader external pressures such as geopolitical tensions, rising oil prices, and currency fluctuations are contributing to a widening current account deficit, projected to reach around 3.2% of GDP in 2026. Such factors could limit the immediate economic gains expected from trade agreements and create vulnerabilities in external balances. Despite these challenges, India continues to pivot toward an export-led growth model, leveraging trade deals and a relatively weaker currency to enhance global competitiveness. The long-term success of this strategy will depend on how effectively the country can convert trade access into actual export growth, attract stable investment, and manage macroeconomic risks. As India deepens its global trade integration, the focus is now shifting from signing agreements to ensuring their effective implementation - balancing growth ambitions with financial stability in an increasingly uncertain global environment.

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India’s Trade Deal Push Faces Rising Concerns Over FDI and Widening… | SEINET