Context

• India’s international economic policy has undergone a major transformation in the last decade.
• Once hesitant about wide-ranging free trade agreements, the country now actively pursues deeper integration with leading global economies.
• The Foreign Trade Policy (FTP) 2023 targets exports of $2 trillion by 2030, reflecting a broader national vision of economic expansion and global influence.
• By 2025, total exports of merchandise and services reached $825.25 billion, showing sustained growth.
• Trade policy now functions not only as an economic mechanism but also as a tool of strategic autonomy, diplomacy, and long-term development. 

From Cautious Trade Engagement to Proactive Integration

• Earlier Approach
  • For decades, India followed a protectionist orientation, preferring agreements with economies at comparable levels of development.
  • Domestic industry protection, economic sovereignty, and controlled market access shaped trade policy.
  • Large-scale engagement with advanced industrial economies remained limited.
• The Policy Shift
  • India has moved toward a more assertive external trade strategy.
  • Negotiations with developed economies have accelerated, and the coverage of exports under free trade agreements (FTAs) is projected to rise from 22% in 2019 to nearly 71% by 2026.
  • Partnerships now include the European Union, United States, United Kingdom, Australia, and United Arab Emirates.
  • This transition represents a shift from regional trade arrangements to participation in high-value markets and deeper integration into global commerce.

Export-Led Growth and Economic Expansion

• Export expansion has become central to India’s growth strategy.
• Greater access to international markets encourages industrial expansion, investment flows, and employment generation.
• Labour-intensive sectors such as textiles and leather gain new opportunities, while high-growth industries like pharmaceuticals, technology, and services trade strengthen competitiveness.
• Integration of Micro, Small, and Medium Enterprises (MSMEs) into global value chains widens the benefits of trade.
• Expanded exports improve productivity and enable domestic firms to upgrade quality and efficiency. Trade therefore acts as a driver of both economic growth and industrial modernization.

Key Trade Agreements

• The India–European Union Free Trade Agreement
  • The India–EU agreement signed on January 27, 2026 marked a major milestone in trade diplomacy.
  • The agreement reduces or eliminates tariffs on over 90% of traded goods, expanding market access for chemicals, marine products, pharmaceutical exports, and manufacturing industries.
  • Access to advanced European machinery lowers production costs and supports industrial upgrading.
  • The agreement strengthens regulatory cooperation, encourages digital trade, and increases investor confidence.
  • Enhanced competitiveness helps Indian exporters compete effectively with countries such as Bangladesh and Vietnam while improving the export ecosystem.
• The India–United States Trade Framework
  • In February 2026, India and the United States signed an interim framework on reciprocal trade while negotiating a broader Bilateral Trade Agreement (BTA).
  • The arrangement gradually reduces tariffs and improves market access for Indian products.
  • The partnership also promotes cooperation in rare earths, semiconductors, and electronics manufacturing.
  • This collaboration strengthens India’s ambition to emerge as a global manufacturing hub and supports expansion of high-technology production and exports.

Integration into Global Value Chains

• Modern production depends on cross-border supply networks. FTAs reduce barriers on intermediate goods, enabling firms to participate in international supply chains.
• Access to inputs, components, and advanced equipment improves efficiency and productivity.
• Sectors such as electronics, pharmaceuticals, and digital services benefit from seamless movement of goods and technology.
• Integration into global production networks marks a transition from import substitution toward competitive integration in the world economy.

Trade Policy as a Tool of Diplomacy

• Economic partnerships now reinforce foreign policy objectives.
• Stronger ties with advanced economies increase India’s role in global economic governance and provide influence in shaping trade standards and regulatory norms.
• Agreements across multiple regions diversify partnerships and prevent excessive reliance on a single trading partner.
• Economic interdependence enhances political relationships, strengthens negotiating capacity, and expands India’s international standing.
• Trade thus functions as both an economic and diplomatic instrument.

Strategic Autonomy and Domestic Development

• Despite expanding globalization, India continues to emphasize independent decision-making.
• After opting out of the Regional Comprehensive Economic Partnership (RCEP), a balanced strategy emerged.
• Domestic production is supported through production-linked incentives (PLI), infrastructure expansion, and manufacturing promotion, while international integration proceeds simultaneously.
• Diversified partnerships, stronger supply chains, and expanding digital economy activity enhance resilience.
• The policy combines domestic capacity building with international cooperation, ensuring growth without dependency.

Conclusion

• India’s trade strategy represents a major reorientation in economic and foreign policy.
• The country has moved from a cautious, protection-focused system toward proactive engagement with major economies.
• Agreements with global partners expand exports, improve technology access, and strengthen diplomatic influence.
• Trade policy now serves as a central pillar of development, enabling the country to emerge as a leading force in the international economic order.