Tariffs dominate global trade discussions. India’s expanding FTA network promises wider market access for Indian pharmaceuticals. However, will preferential trade agreements translate into sustained export competitiveness?
A few global leaders have kept global trade in a state of uncertainty. This situation is similar to the actions of U.S. President Donald Trump. His recent announcement of a phased tariff regime on pharmaceutical imports into the U.S. has once again created waves in the Indian pharma sector. It triggered discussions on exports. Additionally, this development raises concerns about competitiveness and the future of one of India’s largest overseas markets. This development’s yet another reminder that in today’s world, trade policy may alter industry sentiment almost overnight.
This feature begins where that conversation leaves. If tariffs represent one side of the trade equation, then Free Trade Agreements (FTAs) represent the other side. Free Trade Agreements (FTAs) represent the other side. Every FTA’s, in essence, a wager. This is a wager that easier market access today may yield economic benefits in the years to come. New Delhi has been following that bet with increasing conviction. Five years ago, in 2021, India concluded nine FTAs with 38 countries. It signalled a shift in its trade strategy. For Pharma, one of the country’s largest export sectors, the expectation is likely to be clear. The outcome, however, may be far less certain.
Indian pharma established its global standing long before the current FTA momentum gained traction. It raises an important question. Could preferential trade agreements fundamentally alter the industry’s competitive position? Or would they merely provide an advantage that still needs to be earned through quality systems? Furthermore, regulatory credibility, innovation & manufacturing excellence?
More than a tariff story
Public discourse around FTAs tends to revolve around tariff concessions. Yet, for pharma, tariffs have rarely been the defining factor. That is in determining export success. In many developed markets, pharma products tend to attract relatively low or zero import duties. That’s under existing WTO commitments. The latest generation of FTAs therefore offers value in a varied manner. That’s by making trade more predictable. Additionally, the latest generation of FTAs reduces operational friction and creates an environment that encourages long-term commercial relationships.
Businesses make investments that often take years to translate into commercial returns. Consequently, predictability is of enormous importance. CFO, Piramal Pharma, Vivek Valsaraj believes that the significance of FTAs may extend well beyond their impact on duties. India’s FTA network is expanding. It may be viewed as more than a trade facilitation mechanism. FTAs bring together interdependent economies. Also, create greater predictability in commercial relationships besides providing businesses with the confidence to initiate long-term investments.
Partner & Head, India Global, KPMG in India, Neeraj Bansal, echoes this perspective. Bansal argues that the real commercial benefits increasingly lie in easing the movement of business. This is rather than merely lowering import costs. According to Bansal, agreements such as the India-UAE CEPA and India-Australia ECTA, besides the India-UK CETA, are designed to strengthen regulatory cooperation. Additionally, it aims to improve customs efficiency and enhance policy certainty. This makes it more convenient for enterprises to operate across borders. India’s pharma exports crossed USD 31 billion in FY26. This trend may reduce such business friction in becoming increasingly important. This is happening as firms expand into both regulated and high-growth markets.
This trend may be influenced in an industry where manufacturers build their global reputation on scale, cost competitiveness, and quality—rather than on preferential trade access. This distinction may be significant. COO, Shilpa Medicare, Dr Vellaian Karuppiah points out that India’s export strength was built on manufacturing scale. Also, cost competitiveness and quality systems, besides one of the largest bases of regulator-approved facilities outside the U.S. It wasn’t about tariff preferences. Karuppiah was of the view that the significance of the latest agreements lies less in tariff reductions. Likely more in the regulatory cooperation. Also, customs facilitation as well as greater predictability that accompanies them. This enables enterprises to move from opportunistic, price-led exports to deeper, long-term supply relationships.
