Trade war: A second chance for India

India, like any country, integrates with the world through goods, services, and financial flows. It has done very well in the latter two. Now, it has a chance to emerge as a key player in global goods trade—potentially boosting its slowing gross domestic product (GDP) growth.

- RAJESWARI SENGUPTA

The key question is: Can policymakers enable this shift?

Services trade from India has become a major success. From 2005 to 2023, India's share of global services exports doubled—from under 2 per cent to over 4 per cent. Over the past decade, services exports grew over 8 per cent annually and now make up 44 per cent of India's total exports, well above the global average of 25 per cent. At the same time, gradual easing of capital controls has deepened India's financial integration. Between 2011 and 2023, foreign portfolio inflows rose from $180 billion to $460 billion, with their share of GDP increasing from 11 per cent to 14 per cent.

In contrast, goods exports have fallen behind. From 2014 to 2024, they grew at just 3 per cent annually—down from 17 per cent in the previous decade. This slowdown coincided with a rise in protectionism, as average import tariffs doubled from 6 per cent in 2013 to 12 per cent in 2023.