India’s recent free trade agreements (FTAs) could strengthen the country’s manufacturing base, support a revival in private-sector capital expenditure and deepen integration with global supply chains, according to a report by Yes Securities.
The brokerage said India’s latest trade agreements mark a shift towards greater global economic engagement and could help create the conditions for a sustained export-led growth cycle. It identified electronics, pharmaceuticals and engineering and machinery goods as sectors likely to gain the most from improved market access and lower trade barriers.
According to the report, agreements with countries and regions including the UAE, Australia, the UK and EFTA members are being implemented alongside domestic initiatives such as the Production Linked Incentive (PLI) scheme, infrastructure upgrades and efforts to localise supply chains.
Yes Securities said these developments position India favourably as global manufacturers look to diversify production bases under the “China+1” strategy. The report added that India’s scale, labour availability and domestic demand make it one of the few economies capable of absorbing large-scale manufacturing relocation.
Exports Seen Driving Capex
The report said FTAs could also help revive private investment by creating additional export demand for domestic manufacturers.
With capacity utilisation in the manufacturing sector estimated at around 75 per cent, companies have remained cautious about undertaking major expansion plans. Higher export volumes enabled by trade agreements could improve capacity utilisation and economies of scale, encouraging businesses to invest in new capacity, the brokerage noted.
The report drew comparisons with East Asian economies, where export growth played a key role in driving manufacturing expansion and capital formation.
Services exports are also expected to benefit from the agreements. Yes Securities said trade pacts with the UK and the European Union could improve access for sectors such as information technology, consulting, engineering research and development, and financial services.
India is targeting total exports of USD 2 trillion by 2030, with merchandise and services exports contributing equally. The brokerage said the combination of FTAs, industrial policy support and supply-chain diversification trends could strengthen India’s prospects of achieving USD 1 trillion in merchandise exports by the end of the decade.
However, the report cautioned that greater market access alone may not be enough to deliver the desired outcomes. It noted that challenges such as high logistics costs, elevated power tariffs, regulatory complexities and relatively lower labour productivity continue to affect the competitiveness of Indian industry.
The brokerage said addressing these structural constraints would be critical to ensuring that export growth outpaces imports and that the benefits of trade agreements translate into sustained industrial and economic expansion.