outlines the pivot in India’s trade diplomacy
This article, based on the recent analysis by Chandrajit Banerjee (CII), . It is highly relevant for UPSC GS Paper II (International Relations) and GS Paper III (Economy).
India’s Trade Strategy in a Multipolar World: A Paradigm Shift
In a global landscape defined by shifting alliances and economic fragmentation, India has transitioned from a cautious observer to a proactive architect of international trade. Central to this strategy is the ambitious goal of reaching $2 trillion in exports by 2030, underpinned by a philosophy of "Strategic Autonomy."
1. The Shift from Regionalism to Global Integration
Historically, India focused on Free Trade Agreements (FTAs) with similar developing economies. Today, the approach has pivoted toward advanced economies and high-value markets.
* Expansion: India’s FTA network is projected to cover nearly 71% of its total export basket by 2026, a massive jump from 22% in 2019.
* Key Partners: Recent and pending agreements with the UAE, Australia, UK, EU, and the USA signal a move toward deeper integration with global value chains (GVCs).
2. Strategic Milestones: The EU and US Agreements
The year 2026 has marked a watershed moment for Indian trade diplomacy:
* The India-EU FTA (January 2026): Termed the "mother of all deals," it covers a market of nearly two billion people. By removing tariffs on 90% of goods, it boosts competitiveness in labor-intensive sectors like textiles and leather, while easing access to European high-tech machinery.
* The US Interim Agreement (February 2026): This framework focuses on reciprocal trade and strategic collaboration in "critical sectors"—specifically rare earths and semiconductors. It aims to establish India as a reliable alternative hub for high-technology manufacturing.
3. Four Dimensions of the New Strategy
India's approach is built on four strategic pillars:
* Market Access: Preferential access to high-demand markets (EU/US) to boost MSMEs and labor-intensive exports.
* Supply Chain Integration: Reducing barriers on intermediate goods to help Indian firms plug into global production networks, especially in electronics and pharma.
* Strategic Diversification: Reducing over-dependence on any single geography (de-risking) to ensure long-term economic resilience.
* Diplomatic Influence: Using economic interdependence to enhance India’s "voice" in shaping global trade norms and standards.
4. Conclusion: Toward 'Viksit Bharat'
After opting out of the RCEP, India has chosen a "calibrated approach"—combining domestic manufacturing incentives (like PLI schemes) with aggressive external trade diplomacy. This dual strategy is the engine intended to propel India toward its goal of becoming an economic superpower.
Model Questions for UPSC
Mains Practice (Descriptive)
* GS Paper III (Economy): "India’s recent shift from a cautious trade approach to pursuing comprehensive FTAs with developed economies marks a decisive turn in its economic diplomacy." Discuss the potential impact of this shift on India’s MSME sector and its goal of a $2 trillion export target.
* GS Paper II (International Relations): "Economic interdependence is being used as a strategic instrument by India to enhance its diplomatic influence in a multipolar world." Analyze this statement in the context of the India-EU and India-US trade frameworks of 2026.
Prelims Focus (MCQs)
Q1. Consider the following statements regarding India’s Foreign Trade Policy (FTP):
* The 2023 update of the FTP aims to reach $2 trillion in total exports by 2030.
* India is currently a member of the Regional Comprehensive Economic Partnership (RCEP).
* The India-EU Free Trade Agreement signed in 2026 aims to eliminate tariffs on over 90% of traded goods.
Which of the statements above is/are correct?
A) 1 and 2 only
B) 1 and 3 only
C) 2 and 3 only
D) 1, 2, and 3
Q2. The "Interim Agreement on Reciprocal Trade" signed in February 2026 between India and the USA specifically prioritizes collaboration in which of the following areas?
A) Agricultural subsidies and food security
B) Rare earths and semiconductors
C) Intellectual Property Rights in traditional medicine
D) Blue economy and maritime security
Answers for Prelims Focus:
* Q1: B (India opted out of RCEP).
* Q2: B (As per the recent framework mentioned in the article)
Source the hindu