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India rethinking its Global Trade Approach
Context
External Affairs Minister S. Jaishankar has called for accelerated trade deals with Western economies, following the US’s new import tariffs under the Trump Tariffs 2.0 policy. His remarks reflect India’s shift in strategic trade alignment and highlight the urgency in finalising free trade agreements (FTAs) with the US, EU, and UK amid rising US–China rivalry.
Why this shift is significant?
- For many years, India was more open to trading with countries in East and Southeast Asia (like China), but that openness led to cheap imports hurting Indian industries, especially small businesses.
- India is now accelerating trade negotiations with the US, EU, and UK, recognising that these economies offer rule-based systems, legal contract enforcement, and higher absorption for value-added exports.
- India has historically been hesitant on FTAs due to fears of import surges and industry backlash (e.g., RCEP withdrawal).
- But today’s shift is not ideological, it's strategic and necessity-driven, powered by:
- China’s overcapacity export model
- Fear of being excluded from Western supply chains
- The need to anchor domestic reforms to global competition
Why the timing is perfect for the shift?
- Disruption: Protectionist waves, supply chain vulnerabilities, and rising geopolitical competition have severely disrupted international trade in recent years.
- Bipolar Competition: The world is moving into a “US vs China” economic rivalry, and supply chains are shifting. India has a chance to replace China in some areas — but it must act fast. FTAs can help India become part of trusted global supply chains and reduce dependency on uncertain markets.
- Demography: India is entering its prime-age labour force boom (25–54 yrs), just as China’s workforce begins to shrink.
- Geopolitics: The West wants to de-risk supply chains away from China, and India is among the few with both scale and democracy.
- Technology: India has the human capital for semiconductors, AI, and clean tech manufacturing, but lacks global supply chain access — which FTAs can unlock.
Fact Box: Steps taken by India to diversify trade
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