FTAs, not tariffs are the bigger picture for Indian markets: Elara Capital’s Harendra Kumar

Among sectors poised to benefit, Kumar highlighted textiles, footwear, gems and jewellery, aquaculture, and fisheries. He said India had previously missed the textile opportunity after China exited the space, with Bangladesh gaining ground due to India’s policy constraints but that could change.

• India's FTAs seen as key drivers for next phase of economic growth
• Markets have not fully priced in the impact of recent FTAs
• Textiles, footwear, and gems & jewellery sectors expected to benefit most

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India's equity markets are overly focused on tariffs, while missing a much larger structural shift underway through Free Trade Agreements (FTAs), said Harendra Kumar, MD- Institutional Equities, Elara Capital, arguing that FTAs will drive India’s next phase of growth.

In 2025, India signed a series of key trade agreements to expand market access for its exports. The India–UK Comprehensive Economic and Trade Agreement (CETA), signed in July 2025, and the India–Oman Comprehensive Economic Partnership Agreement (CEPA) in December 2025 and India-New Zealand FTA.

“Tariffs are largely a non-event for India,” Kumar said. “Only a small portion of India’s exports to the US are impacted, and those have already been repriced by the market. At best, tariffs will be revised downward, which actually becomes a marginal positive by removing uncertainty.”

According to Kumar, the real story lies in India’s aggressive push toward FTAs, marking the country’s biggest reform movement since the 1990s. “India is fundamentally changing its geo-economic strategy by opening its markets, reducing trade barriers, and encouraging two-way trade. This shift is being underestimated by markets,” he said.

He noted that while India can sustain 7% growth through domestic drivers, achieving 9% growth will require a strong export engine, something FTAs are designed to unlock. “FTAs will enable India to transition from an agri- and services-led economy to one with a much larger manufacturing export component,” Kumar said.

Market yet to fully price in FTAs

Kumar acknowledged that markets have partially reacted to FTAs, citing early rallies in textiles and select export-oriented sectors. However, he said the broader impact has not been fully priced in due to the gradual and staggered nature of trade negotiations.

“Markets dislike ambiguity and long gestation periods. Once the US tariff overhang clears, attention will shift back to FTAs and we will see a repricing,” he said.

He expects the initial impact of FTAs to come from utilization of surplus capacity at export-oriented companies, estimating that 25–30% of existing capacity could be absorbed quickly once agreements are fully notified and implemented. This would be followed by fresh capacity creation in sectors where demand strengthens.

Key Beneficiaries: Textiles, Footwear, Gems & Jewellery

Among sectors poised to benefit, Kumar highlighted textiles, footwear, gems and jewellery, aquaculture, and fisheries. He said India had previously missed the textile opportunity after China exited the space, with Bangladesh gaining ground due to India’s policy constraints but that could change.