MACROECONOMIC EFFECT OF NEW TRADE GAMBLE

INDIA is undertaking one of the most ambitious trade pivots since 1991.

- DEEPANSHU MOHAN & ANKUR SINGH

The pivot doesn’t involve mere tariff reductions or is part of diplomatic symbolism.

It also concerns whether India establishes its manufacturing prowess embedded in global supply chains, or remains as a large consumption market economy that is dependent on imports.

With Commerce Minister Piyush Goyal confirming the operationalisation of recent Free Trade Agreements with the UK and Oman, New Zealand in 2026, New Delhi is decisively redefining its trade posture, which merits a closer scrutiny.

India is gradually integrating into global supply chains not by lowering its multilateral World Trade Organization tariffs, which average roughly around 15.8%, but through targeted bilateral agreements. If these agreements endure, India could emerge as one of the world’s most open large economies.

India commands around 2-3.5% of low-skilled global exports compared to China’s 53%, while merchandise exports remain at 12-13% of GDP. The new treaties aim to close that gap. However, trade pacts expose competitiveness. Share of manufacturing in India’s economy has remained between 15% and 17% for over a decade, far below the government’s 25% aspiration. The question is whether domestic industry is capable of rising.

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