Why This Under-the-Radar FTA Could Strengthen India’s Strategic Position

A relatively low-profile trade agreement between India and Chile is gaining new interest among policymakers and business executives as New Delhi moves toward a complete free trade agreement (FTA) with Santiago.

Although the media focuses on headline deals like the India-US trade deal framework and the India-EU FTA, the Chile FTA is perceived as quietly giving India a strategic economic and industrial advantage.

Why Chile Matters Strategically For India?

As the world struggles to secure resources, Chile is gaining prominence over India because it offers access to critical minerals needed for future industries, particularly with increasing competition in the global market.

Chile is universally known for its vast deposits of critical minerals, especially lithium, a key component of EV batteries and large-scale energy storage. The country also possesses large reserves of copper, cobalt, rhenium, and molybdenum in addition to lithium, all of which are vital to the electronics industry, automotive manufacturing, and solar power.

With growing disruptions in global supply chains and intensifying geopolitical rivalry, guaranteed access to such minerals has become a strategic need for India, more than just a business need. This is why free trade negotiations between India and Chile are far more important than they might seem.

As India aggressively pushes domestic manufacturing under initiatives like Make in India and accelerates its clean energy transition, stronger trade ties with Chile could provide long-term supply security, cost advantages, and greater resilience in strategic mineral supply chains.

What India Is Going To Get From This Agreement?

India and Chile are not beginning their economic relationship from scratch. The two countries had already signed a Preferential Trade Agreement (PTA) in 2006, which served as an early foundation for trade cooperation.

However, the current negotiations aim to go far beyond limited tariff benefits. India and Chile are now working on a Comprehensive Economic Partnership Agreement (CEPA), which is expected to significantly widen the scope of engagement.

Contrary to the previous agreement, the offered CEPA is aimed at involving further cooperation in various aspects of growth, such as:

• Digital trade and services

• Investment promotion

• MSME collaboration

• Technology-linked cooperation

• Critical minerals access

This transition indicates that the relationship between the two nations is shifting toward a more strategic alliance in line with long-term industrial and technological priorities.

What Do The Latest Trade Numbers Reveal About The Opportunity?

Trade between India and Chile is quite low, given their high strategic value, underscoring the potential that remains unexploited.

Key trade numbers between the two countries for FY25 (2024–25) are:

• India’s exports to Chile fell 2.46% to $1.15 billion

• India’s imports from Chile surged 72% to $2.60 billion

The sharp increase in imports indicates the fact that Chile is becoming an increasingly important supplier of raw materials. Simultaneously, the imbalance suggests that India has a better chance of securing inputs to support domestic production and of reducing its dependence on the unstable global supply chains.

How Is India Building A Minerals Footprint In Chile?

Even before the India–Chile free trade agreement is formally concluded, India has already begun making early strategic moves on the ground.

• Coal India Ltd’s board approved the creation of an intermediate holding company in Chile to explore opportunities in critical minerals such as lithium and copper. In a regulatory filing, the state-owned miner confirmed it will hold 100% equity in the Chile-based entity, signalling a notable shift in its long-term strategy as India looks to strengthen access to key raw materials essential for future industries.

• In November last year, Chile’s state-owned copper giant Codelco signed an agreement with the Adani Group to explore copper project opportunities in Chile. The partnership involves reviewing three potential copper projects and sets the stage for possible joint development.

Combined, these actions show that public and private Indian players are positioning themselves early to benefit from closer economic cooperation, even as trade talks near completion.

What Does This Mean For Investors?

The India–Chile FTA plays a supportive long-term role in diversifying India’s industrial inputs and securing supply chains for sectors such as electric vehicles, battery production, renewable energy, and electronics manufacturing.

For investors, this strategic trade move might not prompt an immediate market response, but it enhances structural growth opportunities in clean energy and high-tech production. Over time, improved trade movements and supply chain integration can lead to additional capital expenditure, exports, and even the creation of new export-oriented industries in India.

Sources

Economic Times