India’s ongoing efforts to address its staggering $12.6 billion trade deficit in FY25 with Japan emphasise a larger problem with other FTA partner countries.
The issues that have been flagged in the case of Japan — non-tariff measures and quality controls — are the same that inhibit Indian goods penetration in other markets as well. Sources said the Commerce Department is seeking industry inputs and is going to discuss these issues at the next joint committee meeting of the India-Japan comprehensive economic partnership agreement (CEPA) soon.
Experts said these issues need to be thrashed out in the case of Japan as well as ASEAN, South Korea, and the UAE as well. India has struck FTAs with all these countries following which its trade deficit has widened. For the moment, the focus is on Japan while reviews are ongoing with ASEAN and South Korea.
Trade deficit
While with Japan, India’s trade deficit in FY25 was $12.68 billion, up from $3.5 billion in FY11, with the 10-member ASEAN it was at $45.2 billion, with South Korea at $15.25 billion and with the UAE at $26.79 billion.
“New Delhi has been insisting on a review of the CEPA with Japan as the trade pact, implemented in 2011, has disproportionately benefited Japan. After a successful India-Japan Summit this year, where the CEPA was discussed in details, it is being hoped that the review will happen soon,” a source said.
Trace barriers
Experts say that the government must find out from the industry which non-tariff measures are blocking exports.
“There is a need for thorough examination of all barriers and find solutions as most of the measures are WTO compliant,” said Biswajit Dhar, Distinguished Professor, Council for Social Development.
Trade expert Nagesh Kumar suggested that India and Japan should urgently conduct a review of the CEPA to identify the non-tariff and process-oriented barriers that Indian exporters face in exporting labour-intensive goods (such as textiles, garments and processed foods) to Japan.
“They should recommend the need for capacity building, especially of MSMEs, to comply with those standards,” Kumar said in the 2025 ERIA-CII-ISID Study on India–Japan Economic Partnership for Resilient and Diversified Value Chains.