India's trade deficit with Japan triples in 10 years; FTA review underway

India's trade deficit with Japan has tripled over the past ten years, according to a report in The New Indian Express, putting the spotlight on the effectiveness of the bilateral free trade agreement that has governed commerce between the two countries. The ballooning deficit reflects a structural pattern in which Japanese goods — particularly in automobiles, machinery, and electronics — have flowed into India more freely than Indian exports have penetrated the Japanese market.

A review of the India-Japan Comprehensive Economic Partnership Agreement is currently underway, driven by India's desire to rebalance the relationship. New Delhi is pushing for improved access for Indian pharmaceutical, textile, and IT services exports in Japan, while also seeking to leverage the diplomatic warmth between Prime Minister Modi and successive Japanese leaders to attract greater manufacturing investment from Japanese firms.

The timing of the review is significant. India is simultaneously renegotiating or reviewing several of its FTAs — including with ASEAN — after studies found that many agreements resulted in import surges without commensurate export gains. Japan is a high-priority partner for India's industrial ambitions, particularly as Tokyo looks to diversify supply chains away from China under its economic security framework.

For Indian industry, the tripling of the deficit is both a challenge and an opening. Sectors like auto components, specialty chemicals, and electronics manufacturing are most directly affected. The FTA review's outcome will be keenly watched by industry bodies to see whether India can convert the review process into tangible new market openings.