India and Mexico have formally launched negotiations for a Preferential Trade Agreement after signing terms of reference that define the scope and roadmap for the talks. The move advances an understanding reached by Prime Minister Narendra Modi and Mexican President Claudia Sheinbaum on the sidelines of the G7 Summit in Canada in June 2025.
The negotiating mandate includes market access for goods, rules of origin, customs procedures and trade facilitation, sanitary and phytosanitary measures, technical barriers to trade, dispute settlement and trade remedies. These areas will determine not only tariff preferences but also the practical conditions under which firms can use any eventual agreement.
Mexico matters to India because it is deeply integrated into North American and global manufacturing value chains. The Indian government has identified automotive products, chemicals, electronics, pharmaceuticals, agri-food, energy, critical minerals, medical devices and advanced manufacturing as sectors with potential for deeper cooperation.
A preferential trade agreement is narrower than a comprehensive free trade agreement. It typically provides negotiated tariff preferences on selected products rather than eliminating barriers across most trade. The economic impact will therefore depend on the product coverage, tariff margins, rules of origin and whether businesses actually use the preferences.
The negotiations also fit India's wider effort to diversify trade partnerships and reduce concentration risk in export markets and supply chains. Both sides are considering a Mexican business mission to India in early 2027, which could help translate the government-to-government process into commercial projects.