India’s Free Trade Push Could Boost GDP by $140 Billion by 2035

India is positioning itself to benefit significantly from the global shift in trade dynamics as countries seek reliable partners amid rising protectionism, particularly in the United States. After years of a cautious approach to trade liberalization, New Delhi has accelerated efforts to broaden its network of free trade agreements (FTAs), a move that experts believe could increase the country’s gross domestic product (GDP) by around $140 billion by 2035.

This projection comes from a comprehensive analysis using a large-scale economic model developed by the World Trade Organization. The model evaluates the impact of recent and upcoming trade agreements on India’s economy. It highlights that expanding market access, reducing import costs, attracting foreign direct investment, and boosting productivity are key drivers behind the anticipated economic gains.

Trade relations worldwide are undergoing a major transformation. Since early 2025, the US has raised tariffs substantially, with the average rate on imports climbing from 2.3% in 2024 to about 10.7% by August 2026. The hikes mainly affect sectors such as automobiles and metals, and include targeted tariffs under Section 301 related to forced labor concerns. These measures are expected to reduce US imports by roughly 15%, prompting other nations to diversify their trade partnerships.

In response, the European Union has fast-tracked agreements with countries including Mexico, Mercosur, Indonesia, India, and Australia. ASEAN and China upgraded their free trade pact, while Canada has been active in signing and accelerating deals. India’s trade expansion is notable, with agreements coming into force with the European Free Trade Association, the UK, and Oman during 2025-26. Earlier deals with Australia and the United Arab Emirates began in 2022. India has also signed a free trade agreement with New Zealand and concluded negotiations with the EU. Talks are ongoing with the Eurasian Economic Union and the Gulf Cooperation Council.

India’s relationship with the US has been complex. Following the announcement of a bilateral trade agreement plan by Prime Minister Narendra Modi and President Donald Trump in February 2025, tensions emerged when the US imposed reciprocal tariffs of 25% and additional levies tied to Russian oil imports. These tariffs significantly impacted Indian exports, but some easing has occurred since early 2026, including tariff reductions and lower rates applied to Indian goods compared to other partners. An interim deal appears possible, though a comprehensive agreement remains challenging.

The economic modeling suggests that despite the higher US tariffs, India’s overall exposure to the US market is limited, with less than 2% of output dependent on US trade. Therefore, while Indian exports to the US may fall by about 20% by 2035, the broader impact on India’s GDP is expected to be minimal. Stronger export growth to other regions should offset losses.

The potential gains from India’s FTAs come through three main channels. First, bilateral tariffs on Indian goods are expected to be eliminated swiftly by partner countries, with India reciprocating by removing tariffs on industrial products and gradually reducing tariffs on agricultural goods. Second, non-tariff barriers affecting goods and services are projected to decline significantly over 15 years, improving trade efficiency and lowering uncertainty. Third, foreign direct investment inflows tied to these agreements are anticipated to rise, supporting productivity enhancements, particularly from commitments involving the European Free Trade Association and New Zealand.

Projected GDP growth from these agreements is estimated at 1.2% by 2035 for deals already implemented, rising to 1.7% once agreements with the EU and New Zealand start. This translates to roughly a $140 billion increase in economic output measured in 2025 US dollars. Additional negotiations with the Eurasian Economic Union, Gulf Cooperation Council, and Israel could push gains to about 2.1% of GDP, around $170 billion. Trade volumes are also expected to climb, with exports potentially 10% above baseline levels if all deals are completed.

Beyond trade agreements, domestic factors will influence the magnitude of these benefits. India’s ongoing reforms aimed at lowering production costs—through tax cuts, improved infrastructure, and skill development—could further boost manufacturing efficiency. Modeling suggests this could reduce production costs by about 2%, adding around 1 percentage point to export growth and 0.5 percentage points to GDP growth by 2035.

Another important factor is the large segment of India’s workforce still engaged in agriculture, over 40%, with significant underemployment. Drawing a comparison to Vietnam’s experience, where agricultural employment fell and productivity increased substantially, India could similarly enhance agricultural productivity and shift labor toward manufacturing and services. If this transition occurs over the next decade, additional productivity gains would support higher economic growth and job creation.

India’s strategic push to expand its free trade agreements aligns with a global trend where countries seek to diversify supply chains and strengthen economic ties amid geopolitical uncertainties. Successfully implementing these agreements and complementing them with domestic reforms could help India solidify its position as a growing economic power in the coming decades.