India’s Trade Strategy in a Multipolar World

UPSC Syllabus: Gs Paper 2- International Relation.

Introduction

India’s trade strategy in a multipolar world is shaped by rising exports, ambitious free trade agreements, and a clear goal of reaching $2 trillion exports by 2030 under the 2023 Foreign Trade Policy. In 2025, total exports reached $825.25 billion with 6.05% growth. Trade is now linked with strategic autonomy, supply chains, and national security in a fragmented global order.

The Shift in India’s Trade Approach

1. From cautious FTAs to active engagement: For many years, India signed agreements mainly with similar developing economies. Now it pursues comprehensive FTAs with major developed economies that were earlier beyond reach.
2. Expansion of FTA coverage: India’s FTA network is projected to cover 71% of its export basket by 2026, up from 22% in 2019, showing a decisive policy shift.
3. Integration with advanced markets: Agreements with Australia, the EU, the UAE, the U.K., and the U.S. show a move from regional focus to deeper integration with high-value economies.
4. Balancing domestic strength and global openness: After opting out of RCEP, India adopted a calibrated strategy by boosting domestic manufacturing through production-linked incentives and infrastructure expansion while deepening global integration.

Major Trade Agreements as Strategic Milestones

1. India–EU Free Trade Agreement:

• Signed on January 27, 2026, it creates a free trade zone of nearly two billion people and reduces or eliminates tariffs on over 90% of traded goods.
• Sectoral gains under the EU deal: It boosts textiles, leather, pharmaceuticals, chemicals, and marine products, enhances regulatory cooperation, lowers production costs through easier access to advanced machinery, and promotes digital trade and investor confidence.
• Improved competitiveness and MSME integration: The EU agreement strengthens India’s position against Bangladesh and Vietnam and integrates MSMEs into Global Value Chains.

2. U.S. interim reciprocal trade framework:

• Signed in February 2026, it reduces tariffs progressively and advances negotiations toward a broader Bilateral Trade Agreement.
• Strategic sector cooperation with the U.S.: Collaboration in rare earths and semiconductors supports high-technology manufacturing and strengthens India’s role as a reliable electronics and semiconductor hub.

3. Diversification and flexibility: These agreements reduce overdependence on specific markets and enhance strategic and economic flexibility.

Trade in the Context of Global Transformation

1. Blurring of trade and national security: Economic coercion, technological exclusion, and supply chain weaponisation now directly affect sovereignty.
2. Integration and fragmentation together: Sanctions, export controls, industrial regulations, and technology limits increasingly shape cross-border flows.
3. Power through system control: Influence depends on control over payment systems, logistics networks, standards bodies, and compliance infrastructure, not only trade volume.
4. Weakening of multilateral discipline: The erosion of global trade governance shows that rules alone cannot constrain major powers.
5. Chokepoints as pressure tools: Financial sanctions, semiconductor export restrictions, and shipping or insurance disruptions show how economic access can be limited without military conflict.

Strategic Dimensions of India’s Trade Policy

1. Preferential access to high-demand markets: Engagement with advanced economies strengthens export potential and supports labour-intensive sectors and MSMEs.
2. Integration into global supply chains: Reduction of barriers on exports and intermediate imports improves competitiveness in technology, electronics, pharmaceuticals, and services.
3. Export diversification across continents: Agreements across regions enhance economic resilience and reduce vulnerability to market concentration.
4. Enhanced diplomatic leverage: Deeper economic interdependence strengthens India’s voice in global economic governance and trade norm-setting.

Way Forward

1. Building platform power: India must influence the systems and standards that govern trade to reduce structural vulnerability.
2. Focus on operational systems: Priority should be given to compliance systems, logistics coordination, payment infrastructure, and trusted digital verification frameworks.
3. Reimagining services and digital trade: India should move from executing services to building trusted systems such as digital identity, secure payments, and automated compliance.
4. Institutional reforms and speed: Integrated doctrine, mission-driven governance, predictable data rules, standards participation, modular system export, and faster institutional response are necessary to strengthen long-term resilience.

Conclusion

India’s trade strategy combines export expansion, diversification, and strategic engagement with major economies. In a fragmented global order, sovereignty depends on resilience and freedom of choice. By deepening FTAs, strengthening supply chains, and building trusted trade systems, India aims to move from being a large market to becoming a rule-shaping and system-influencing power in global commerce.

Source – The Hindu