India has concluded eight trade agreements over the past five years, with partners including the United Kingdom (UK), the European Union (EU), the European Free Trade Association (EFTA), New Zealand and Australia, among others. Against this backdrop, the Terms of Reference (ToR) signed with Sacu on August 12 marks a significant departure.

The proposed Preferential Trade Agreement (PTA) would also be India’s first trade agreement with an African regional bloc.

India and the five-member Sacu bloc, comprising South Africa, Namibia, Botswana, Lesotho and Eswatini, expect to initiate the negotiations soon and aim to conclude it within a year.

The timing is significant. New Delhi is looking for new export markets at a time when protectionism and trade uncertainty have complicated access to India’s top export destination—the US. Africa, meanwhile, is becoming increasingly important in India's trade basket.

Why Africa, why now?

The government sees the pact as more than an exercise in lowering tariffs. It could help India deepen its integration with African supply chains at a time when companies and governments globally are seeking to diversify trade and reduce supply-chain vulnerabilities.

“Africa is one region where our trade has been increasing and that is also one region where we don’t have any trade agreement. Meanwhile, other parts of the world are integrating with that region,” Commerce Secretary Rajesh Agrawal said last month.

African economies have increasingly featured among India’s important export destinations. Within the Sacu, South Africa has ranked among India’s top 10 export destinations in each of the last three months. It is also by far India's largest trading partner within the bloc, accounting for nearly 93 per cent of India's total trade with Sacu in 2025-26 (FY26).

That concentration in one country, however, also points to an immediate limitation. While the proposed agreement is with a five-member customs union, its commercial significance for India may depend heavily on South Africa. Still, the agreement could give Indian companies a foothold in a region where India has growing commercial interests but no existing trade agreement.

A calibrated bet

Unlike the comprehensive free trade agreements India has recently concluded with developed economies, the proposed pact with Sacu is a preferential trade agreement (PTA) focused initially on goods.

The distinction is deliberate.

India and Sacu are both developing economies, with overlapping interests in some sectors and potential complementarities in others. A narrower agreement could allow both sides to test the commercial potential of deeper integration without immediately exposing sensitive sectors to sweeping tariff concessions.

“There are areas where we may be competing with each other, but there will also be areas where we complement each other. So PTA will give us that space to find a path to build our complementarities without touching other sensitive areas,” Agrawal said.

The agreement is expected to cover eight areas: trade in goods and market access, rules of origin, customs procedures and trade facilitation, trade remedies, sanitary and phytosanitary measures, technical barriers to trade, dispute settlement, and legal and horizontal provisions.

For India, the proposed PTA could potentially be a test of whether smaller and more calibrated trade agreements can deliver meaningful gains in developing markets. "Unlike a trade deal with a developed economy, where gains are usually clearly defined, here gains may be more nuanced, which is why a calibrated approach like a PTA is the best bet for India and Sacu. Both can move forward where they are comfortable," said Agneshwar Sen, trade policy leader at EY India.

There could be some meaningful opportunities for Indian exporters. Pharmaceuticals, chemicals, and light engineering are among the sectors that could gain from greater market access under the deal, Sen said.

Critical gains

The relationship could also serve a strategic purpose beyond export markets. India's imports from Sacu include manganese and copper ores, raising the possibility that closer trade ties could help diversify the country's sources of critical minerals.

“The PTA with Sacu may potentially help diversify the supply of critical minerals into India,” said Ajay Srivastava, founder of New Delhi-based Global Trade Research Initiative (GTRI). This could become increasingly important as India seeks to build manufacturing capacity while reducing dependence on concentrated global supply chains.

The strategic case for deeper engagement with the region also extends to India's broader diplomatic alignment with African economies. India and South Africa, in particular, have often found common ground at the World Trade Organization (WTO), where both have pushed for the interests of developing economies and defended the multilateral trading system.

“Both the economies have been on the same page on several discourses at the WTO. South Africa and India maintain a powerful, active alliance at the WTO, consistently joining forces to champion the interests of developing nations, defend multilateralism, and push back against wealthy economies,” Srivastava said.

But trade diplomacy and commercial interests do not always move in tandem.

Where interests collide

India's existing trade basket points to potential complementarities. Petroleum products, motor vehicles and medicaments are among India's major exports to Sacu, while gold, coal and diamonds dominate imports from the bloc.

But the complementarities between India and Sacu are not as straightforward as the trade basket may suggest. South Africa itself is seeking to strengthen domestic manufacturing and employment, which may create potential friction with India's export ambitions.

"Both India and Sacu are developing economies with converging priorities--employment generation and manufacturing capacity chief among them. That reality will shape the concessions exchanged under this PTA,” Sen said.

 “South Africa's push to protect its auto industry may run against India's interest in autos, one of our largest export categories to the region. This isn't one side offensive and the other defensive; both are protecting the same developmental space from their own vantage point. Complementary solutions will have to be negotiated, not simply reciprocal ones," he added.

The negotiating challenge, therefore, will be to identify sectors where greater market access creates mutual gains rather than simply exposing one side's domestic industry to competition from the other.

Gold presents another complication. Gold is India's largest import from Sacu, but New Delhi has limited room to offer preferential access on the commodity, Srivastava said. “New Delhi has learnt its lesson with the lesson with the United Arab Emirates (UAE) trade deal,” he added.

Under India's trade agreement with the UAE, tariff concessions on a specified quota of gold contributed to a sharp rise in imports, raising concerns over disruption to the domestic market. The government subsequently tightened regulations to curb misuse of preferential tariffs.

The Sacu negotiations will therefore require India to distinguish between products where greater access can create genuine economic gains and those where tariff concessions could simply encourage imports without generating comparable benefits.

The deal that got away

This is not the first time India and Sacu have attempted to negotiate a trade agreement. The two sides began negotiations in the first decade of the millennium, but talks eventually stalled after five rounds amid disagreements over market access, rules of origin, and the varying levels of development among Sacu members.

According to African think tank Trade Law Centre (tralac), the main product categories of export interest for India during the previous round of talks were textiles and clothing, machinery, plastic products and base metals--many of them labour-intensive sectors.

That creates a familiar problem for both sides. India wants greater access for labour-intensive exports, but Sacu economies are themselves seeking to develop domestic manufacturing and employment. The very sectors where India sees export opportunities may therefore be among those where African economies are most reluctant to offer concessions.

The economic development gap among the Sacu members adds another layer of complexity. Namibia's Ministry of International Relations and Trade Executive Director Ndiitah Nghipondoka-Robiati, who signed the ToR on behalf of Sacu, specifically emphasised that the agreement would have to account for the different levels of development within the bloc.

“The interest and development needs of Sacu members, particularly our least developed countries and small vulnerable economies, must find appropriate consideration in the agreement we build together,” Robaiti said before signing the ToR.

The negotiating environment is appears different from India's recent FTAs with developed economies. Here, India is not simply negotiating access to another market. It is negotiating with economies that have their own industrialisation ambitions, developmental constraints and sensitivities.

Is this a new trade strategy?

The Sacu negotiations could ultimately reveal whether India's trade strategy is entering a new phase.

The past five years have produced a string of agreements with developed economies, giving Indian exporters preferential access to some of the world's largest and most sophisticated markets. But the experience has also underscored the difficulty of negotiating comprehensive agreements that involve sensitive sectors, rules of origin, investment, services and other areas.

A PTA with Sacu offers a different model: start with goods, focus on areas of complementarity and gradually deepen the relationship.

That may make sense as India looks beyond traditional developed markets. But the success of the strategy will depend on whether such agreements can generate enough incremental exports and supply-chain benefits to justify the negotiating effort.

The Sacu bloc is not a large market by global standards, and India's trade remains heavily concentrated in South Africa. Yet the proposed agreement has significance beyond its immediate trade numbers.

It tests whether New Delhi can simultaneously pursue three objectives that do not always sit comfortably together: finding new markets for its exporters, securing critical inputs for its manufacturing ambitions, and protecting sensitive domestic industries.

If India and Sacu can reconcile those competing objectives, the agreement could offer a template for a more diversified phase of India's trade diplomacy, one that looks beyond developed economies to emerging markets where the gains may be less immediate, but potentially more strategic.