Tariff cuts in FTAS likely to cost India 1 trillion in FY27

The customs duty forgone due to the preferential tariff reductions provided under the existing Free Trade Agreements (FTAs) is expected to exceed ₹1 trillion in FY27 (2026-27), as indicated by the recent budget documents revealed by Business Standard.In the current financial year FY26, the actual revenue forgone was ₹98,569 crore, exceeding the budgeted ₹94,172 crore. Out of the existing FTAs, the largest share of ₹40,833 crore comes from the ASEAN FTA in FY27, followed by the Japan FTA at ₹11,365 crore, South Korea at ₹10,872 crore, the UAE at ₹9,267 crore, and Australia at ₹5,107 crore. Though the trade benefits of these tariff reductions are aimed at increasing India’s exports and global competitiveness, the forgone duty poses a major challenge for the government while meeting India’s export targets of $1 trillion of goods and services by FY27 through the existing and new trade agreements.