India has been embracing regionalism in a big way in recent years. Regional trade agreements are growing not only in number but also in their depth and coverage, thus diverting a significant portion of India’s trade through the preferential route. Such a trade promotion strategy emphasises market access rather than deal with supply-side efficiencies.

The United States and the European Union have in recent years initiated negotiations on a large number of bilateral and regional trade agreements. These agreements tend to push trade liberalisation much further than is possible under the multilateral trade regime. These rtas also include rules which are likely to reduce the policy space for developing countries.

In the short run, India is not going to benefit from the free trade agreement with the Association of South-East Asian Nations that was finalised recently. ASEAN is not a natural trading partner of India, and, unlike China, India has not established close relations with the region.