India’s expanding trade pact network could double global market access for domestic firms: World Bank – Firstpost

India’s recently concluded trade agreements with the United Kingdom and the European Union are poised to significantly expand global market access for domestic companies, boosting export opportunities, competitiveness and long-term economic growth, according to a new assessment by the World Bank.

In its latest report on South Asia’s trade reforms, the World Bank said India’s free trade agreements (FTAs) with the UK and the EU would increase the scope of preferential market access available to Indian businesses from roughly one-sixth of global gross domestic product (GDP) to nearly one-third.

The findings come as New Delhi pursues an ambitious trade agenda, with negotiations for a bilateral
trade agreement with the United States entering a crucial phase and policymakers seeking deeper integration with global supply chains.

“India’s new free trade agreements with the European Union and the United Kingdom are doubling the scope of preferential international market access for domestic firms from currently one-sixth to one-third of global GDP,” the World Bank said in the report.

Trade opening to strengthen India’s global integration

The report highlights the growing importance of trade liberalisation as India seeks to position itself as a global manufacturing and export hub amid shifting international trade patterns.

The World Bank noted that South Asia remains the least open region among emerging market and developing economies. In 2024, goods exports accounted for only about 12 per cent of GDP across the region — roughly half the level recorded in other emerging markets.

A key factor behind the region’s limited trade integration has been high tariff barriers. Manufacturers in South Asia face average tariffs on imported intermediate goods that are more than twice those imposed in other emerging economies, increasing production costs and reducing competitiveness.

Against this backdrop, the World Bank said India’s trade agreements with the UK and the EU represent a significant step towards lowering trade barriers and enhancing integration with global markets.

Tariff reductions expected to boost competitiveness

According to the report, India’s tariff-cut commitments under the new trade arrangements would translate into an average reduction of about nine percentage points in import duties.

Lower tariffs are expected to reduce input costs for manufacturers, improve efficiency and strengthen the competitiveness of Indian exports in international markets.

The World Bank’s assessment comes even as it projects South Asia’s economic growth to moderate to 6.3 per cent this year amid heightened global uncertainty, underscoring the need for exports and trade integration to emerge as key growth drivers.

Households likely to benefit from lower prices

The benefits of trade liberalisation are expected to extend beyond businesses and exporters.

The report said lower tariffs on manufactured goods could reduce consumer prices and raise real incomes across income groups. Rural households, in particular, stand to gain as manufactured products account for a larger share of their consumption basket.

By lowering the cost of imported goods and production inputs, trade reforms could improve purchasing power while supporting broader economic welfare gains.

Textiles, leather sectors among key beneficiaries

At the sectoral level, the World Bank identified textiles and leather manufacturing as among the biggest potential beneficiaries of lower trade barriers.

These industries currently face relatively high import tariffs despite possessing strong export potential. Reduced duties could improve access to imported raw materials and intermediate goods while enhancing competitiveness in overseas markets.

The report acknowledged that increased trade openness could intensify competition for some domestic producers. However, it added that lower costs for imported inputs would help offset competitive pressures and support productivity improvements across industries.

Trade reforms critical for job creation

The World Bank said stronger trade integration could play a crucial role in supporting employment generation across South Asia, where an estimated 280 million people are expected to enter the workforce over the next decade.

To maximise the gains from trade liberalisation, governments will need to complement tariff reductions with broader reforms aimed at improving productivity, supporting business expansion and facilitating labour mobility into export-oriented sectors, the report said.