[25th February 2026] The Hindu OpED: India’s trade strategy in a multipolar world

Mentor’s Comment

India is revising its trade strategy in response to geopolitical tensions, shifting supply chains, and growing protectionism. This topic is highly relevant for GS 2 (India’s foreign policy and international relations) and GS 3 (Indian economy, external sector, globalization, and industrial growth), especially in questions related to trade policy, economic diplomacy, supply-chain resilience, and strategic autonomy in a multipolar world.

Why in the News?

India’s recent signing of the India-EU Free Trade Agreement (January 2026) and an interim trade framework with the U.S. (February 2026) marks one of its most ambitious trade expansions in recent years. These moves reflect a clear departure from its earlier cautious FTA approach and signal a strategic push to position India as a key player in a multipolar global trading system.

How Does India’s Revised FTA Strategy Reflect a Shift in Governance Philosophy?

1. Strategic Autonomy Framework: Ensures sovereign decision-making while engaging major economic powers. Expands beyond regional FTAs to advanced economies such as EU, U.S., U.K., UAE, and Australia.
2. Market Diversification: Reduces overdependence on single geographies. FTAs projected to cover 22% of exports by 2026, up from 17%.
3. Institutional Reform Alignment: Aligns FTAs with domestic reforms under FTP 2023 targeting $2 trillion exports by 2030.
4. Value Chain Integration: Facilitates integration into global production networks rather than mere tariff concessions.

How Do Recent Trade Agreements Strengthen India’s Export Competitiveness and Industrial Capacity?

1. Tariff Liberalisation: Reduces or eliminates tariffs on over 90% of traded goods, enhancing cost competitiveness.
2. Sectoral Boost: Strengthens textiles, leather, pharmaceuticals, chemicals, marine products, electronics, and semiconductors.
3. Technology Access: Facilitates access to advanced European machinery and U.S. semiconductor collaboration.
4. Production Efficiency: Lowers input costs and enhances regulatory cooperation, improving manufacturing productivity.
5. Export Performance Data: Recorded 6.05% annual growth in exports in 2025; total exports reached $825.25 billion.

How Do FTAs Enhance India’s Integration into Global Supply Chains and Digital Trade Ecosystems?

1. Intermediate Goods Liberalisation: Reduces barriers on inputs, enabling seamless cross-border production.
2. Digital Trade Facilitation: Expands cooperation in e-commerce, services trade, and digital standards alignment.
3. MSME Integration: Integrates Micro, Small and Medium Enterprises into global value chains through improved market access.
4. High-Growth Sectors: Strengthens pharmaceuticals, electronics, services, and high-technology industries dependent on component mobility.

How Do Trade Agreements Operate as Instruments of Economic Diplomacy in a Multipolar Order?

1. Diplomatic Leverage: Enhances India’s role in shaping global trade norms and standards.
2. Geopolitical Balancing: Diversifies partnerships across EU, U.S., UAE, Australia, and U.K., reducing vulnerability.
3. Investment Attraction: Strengthens investor confidence through predictable regulatory frameworks.
4. Strategic Signalling: Projects India as a reliable global trade partner amid supply-chain reconfiguration.

What Institutional and Regulatory Reforms Are Necessary to Maximise FTA Gains?

1. Customs Modernisation: Ensures faster clearance and trade facilitation under WTO-compliant mechanisms.
2. Standards Harmonisation: Aligns domestic quality infrastructure with global standards.
3. Supply Chain Infrastructure: Expands logistics capacity and port efficiency to reduce transaction costs.
4. Production-Linked Incentives (PLI): Supports domestic manufacturing scale-up in electronics and high-tech sectors.
5. Digital Governance: Strengthens data governance and digital trade regulations.

What Are the Structural Risks and Governance Challenges in Aggressive Trade Liberalisation?

1. Domestic Industry Exposure: Increases competition pressure on sensitive sectors.
2. Trade Deficit Risk: Expands imports of intermediate and capital goods.
3. Regulatory Adjustment Costs: Requires institutional capacity to implement complex trade provisions.
4. Labour and Environmental Standards: Necessitates compliance with evolving global norms.

Conclusion

India’s evolving trade strategy reflects a calibrated shift from protection-driven engagement to rule-based, strategic integration with major economies. By aligning FTAs with domestic industrial policy, supply-chain resilience, and digital governance reforms, India seeks to convert trade agreements into instruments of long-term economic transformation. The effectiveness of this approach will depend on regulatory preparedness, institutional capacity, and the ability to balance competitiveness with strategic autonomy in an increasingly fragmented global order.