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What are the challenges before the Indian economy when the world is moving away from free trade and multilateralism to protectionism and bilateralism? How can these challenges be met?

According to the Economic Survey, the previous global paradigm of ‘stable geopolitics’ and ‘free trade and investment movement’, has been fading and the foundations on which many nations built themselves are now being shaken.

World Moving from Free Trade & Multilateralism to Protectionism & Bilateralism

Trade Wars – US-China tariff wars

WTO Deadlock over Doha Development Agenda

Rise of Bilateral/Regional Deals – Eg- RCEP

Green Protectionism – EU’s Carbon Border Adjustment Mechanism (CBAM), US CHIPS Act

Challenges before the Indian economy

Fragmentation of Global Trade due to rise in tariffs, sanctions etc threaten export-oriented sectors. Eg- IT Industry

Volatile Capital Flows

Energy security challenges due to sanctions on Russia (40% share)

Currency Depreciation

Technology Barriers – New protectionist tools like data localisation rules of EU.

Employment Impact – Labour-intensive sectors like textiles, gems, and automobiles face slowdown.

Way Forward

Internal Measures

Ease of Doing Business – The Economic Survey (2024-25) key recommendation is ‘to get the domestic economic engine purring by pulling all the levers of deregulation’.

Raising the investment rate to around 35% of GDP from the current level of ~ 31%.

Boost domestic demand through high public capex

Build resilience in semiconductors, defence, and critical minerals under Atmanirbhar Bharat.

External Measures (Global Integration)

Diversify Export Markets – Expand trade with Africa, Latin America, Central Asia, and ASEAN.

Conclude Balanced FTAs – With EU, Canada, Australia.

Strengthen IMEC, INSTC, and Chabahar Port for secure and cost-effective routes.

Global South Leadership in WTO to revive dispute settlement and ensure fair rules.

A self-sustained growth strategy is imperative for India’s long-term economic sovereignty.