[Answered] “Analyze the strategic role of Free Trade Agreements and trade reforms in India’s foreign policy within a multipolar world. Evaluate their potential to propel export-led growth and enhance India’s global standing amidst shifting geopolitical and economic alliances.”

Introduction

With exports reaching $825 billion in 2025 and a target of $2 trillion by 2030 under the 2023 Foreign Trade Policy, India’s trade strategy reflects calibrated integration in an increasingly multipolar global economy.

Trade as Statecraft in a Multipolar Order

1. The post-WTO “hyper-globalisation” era has given way to strategic trade realism, where commerce is intertwined with geopolitics. Supply-chain resilience, friend-shoring, and techno-economic security now define global trade.
2. India’s withdrawal from Regional Comprehensive Economic Partnership (RCEP) in 2019 marked a shift from passive multilateralism to selective, interest-driven bilateralism. Today, trade agreements are instruments of strategic autonomy — enabling diversification without overdependence.

The External Pillar: New-Generation FTAs

1. Deep Integration with Advanced Economies: India’s recent agreements reflect a pivot toward developed markets:

• The India-UAE CEPA with United Arab Emirates (2022) boosted bilateral trade past $85 billion.
• The Economic Cooperation and Trade Agreement with Australia opened mineral and education linkages.
• The landmark 2026 FTA with the European Union reduces tariffs on over 90% of traded goods, benefiting textiles, pharmaceuticals, and marine exports.
• Negotiations toward a Bilateral Trade Agreement with the United States focus on semiconductors and critical minerals.
• Unlike earlier tariff-centric FTAs, these include chapters on digital trade, sustainability, intellectual property, and labour standards, aligning India with emerging global trade norms.

2. Integration into Global Value Chains (GVCs): Modern FTAs facilitate seamless movement of intermediate goods, enhancing India’s participation in electronics, pharmaceuticals, and automotive supply chains. According to the World Bank, deeper GVC integration can raise productivity by up to 1% annually. Strategically, such agreements operationalise friend-shoring — reducing dependency on adversarial geographies while strengthening partnerships within Quad and I2U2 frameworks.

The Internal Pillar: Trade Reforms and Competitivenes

1. Logistics and Infrastructure Modernisation: Under PM Gati Shakti, logistics costs — historically 13–14% of GDP — are targeted to fall below 9%, enhancing export competitiveness. Port digitisation and multimodal connectivity improve turnaround times.
2. Production-Linked Incentive (PLI) Schemes: PLI 2.0 incentivises high-value manufacturing in electronics, solar modules, and semiconductors. India has emerged as a major mobile phone exporter, signalling movement up the value chain.
3. Regulatory and Green Compliance: With the EU’s Carbon Border Adjustment Mechanism (CBAM), decarbonised manufacturing is critical. India’s push toward green hydrogen and renewable energy safeguards export competitiveness while aligning with ESG norms.

Evaluating Challenges

1. Risk of the Middle-Income Trap: If FTAs merely expand imports without domestic value addition, India risks becoming an assembly hub. Export sophistication must rise through innovation and R&D.
2. Non-Tariff Barriers (NTBs): Sanitary and Phytosanitary (SPS) standards and Technical Barriers to Trade (TBT) remain obstacles. Mutual Recognition Agreements (MRAs) and standards harmonisation are essential.
3. Geopolitical Balancing: India must balance trade with Western economies while sustaining energy ties with Russia and West Asia. A “Goldilocks strategy”, neither protectionist nor excessively dependent, defines its calibrated multi-alignment.

Strategic Payoffs

1. FTAs enhance India’s diplomatic leverage, integrate MSMEs into global markets, and project India as a rule-shaper rather than rule-taker. Trade agreements now serve as vehicles for economic diplomacy, reinforcing India’s claim to leadership in the Global South.
2. Export-led growth, supported by structural reforms, could help India sustain 7–8% GDP growth and transition toward a $7 trillion economy.

Conclusion

As President A. P. J. Abdul Kalam envisioned in India 2020, economic strength underpins strategic autonomy. India’s trade realism fuses Atmanirbharta with outward integration, securing prosperity amid geopolitical flux.