• The global economy is undergoing significant upheaval, marked by shifting trade dynamics, rising geopolitical tensions, and a growing wave of protectionism.
• As trade wars escalate and tariff frameworks are revisited, the global economic environment has become increasingly volatile — impacting not only international trade but also financial markets and long-term growth prospects.
• In this evolving scenario, India finds itself at a critical juncture: facing external pressures but also presented with strategic opportunities to reposition itself within the global economic order.

Global Trade Landscape: Key Risks and Challenges

1.     Rising Protectionism and Tariff Uncertainty
The U.S., India’s largest export market, has moved towards more protectionist trade policies across successive administrations.
Frequent reviews of trade deals, new reciprocal tariffs, and a preference for bilateral over multilateral agreements have created uncertainty for Indian exporters.

2.     Legal Ambiguities in Trade Policy
Unpredictability in U.S. trade actions is further complicated by legal hurdles.
Recent rulings, like that of the U.S. Court of International Trade, have questioned the legality of certain tariff measures, leaving Indian policymakers unsure of long-term outcomes.

3.     Intensifying Global Competition
India also faces stiff competition from countries like China, Bangladesh, and Vietnam — especially in textiles, electronics, and manufacturing.
These nations may gain preferential access to major markets like the U.S. and EU, potentially disadvantaging Indian exports.

Strategic Opportunities for India

1.     Proactive Trade Diplomacy
India’s early move to negotiate a Bilateral Trade Agreement (BTA) with the U.S. reflects a forward-looking strategy.
Finalising such deals quickly could give India a competitive edge — particularly if they ensure zero-tariff access in key sectors, protect services exports, and address non-tariff barriers through mutual recognition agreements.

2.     Expanding Trade Partnerships
The recently concluded Free Trade Agreement with the UK is a step in the right direction.
India must now fast-track similar agreements with the EU and Australia, broadening market access and reducing reliance on any single trade partner.

Policy Roadmap for the Future

1.     Guarding Against Dumping
India must strengthen its trade defence mechanisms, including anti-dumping duties, to protect domestic industries from cheap imports and unfair pricing.

2.     Sustaining Public Investment
Continued public capital expenditure is vital for cushioning external shocks and catalyzing private sector investment — laying a foundation for long-term growth.

3.     Maintaining Accommodative Monetary Policy
With inflation moderating, the Reserve Bank of India should maintain a supportive interest rate environment to encourage borrowing, production, and investment.

4.     Attracting Foreign Investment
India should position itself as an attractive alternative to China for global firms.
Strategic sectors like electronics, e-mobility, and green energy hold particular promise for securing large-scale foreign direct investment (FDI).

Structural Reforms: A Long-Term Imperative

• India’s economic resilience must be underpinned by continued structural reforms.
• Production-Linked Incentive (PLI) schemes should be expanded to include high-growth emerging areas such as IoT devices, wearables, hearables, and advanced battery components.
• This will enhance domestic manufacturing capabilities, reduce reliance on imports, and elevate India’s position in global value chains.