INDIA'S TRADE RESET

TWO TRADE PACTS IN TWO WEEKS AND A GROWTH-ORIENTED BUDGET COULD REDEFINE THE COUNTRY'S ECONOMIC PROSPECTS

- BY SURABHI

THERE ARE DECADES WHERE NOTHING HAPPENS; AND THERE ARE WEEKS WHERE DECADES HAPPEN.” THE COMMENT BY VLADIMIR LENIN, THE ARCHITECT AND FOUNDER OF SOVIET RUSSIA, IS A PERFECT SUMMATION OF THE RECENT DEVELOPMENTS IN INDIA. THE WEEK FROM JANUARY 26 TO FEBRUARY 2 SAW THE INDIAN ECONOMY SURMOUNT LONG-PENDING AND SEEMINGLY INTRACTABLE CHALLENGES.

First came an agreement for a trade deal with the 27-member European Union (EU), punctuated by the presentation of the Union Budget 2006-27 on February 1, capped by a late-night tweet from US President Donald Trump on February 2 announcing a trade pact that will lower tariff on specified Indian goods from a staggering 50% to 18%.

The three developments—the India-EU FTA, a Union Budget focussed on growth and capacity building, and the trade pact with the US—are set to brighten India’s economic outlook for FY27. While much will depend on the fine print of the measures and how they are executed, policymakers, economists and industry stakeholders are hopeful these will remove uncertainty and boost investments and economic activity.

Prime Minister Narendra Modi said the deals have given the world confidence that it is moving towards stability and will expand opportunities for India’s youth. The US and the EU are the world’s largest economies with a combined GDP of $50 trillion and India’s key export destinations. India’s exports to the US were 2.2% of GDP and to the EU they were 2% of GDP in FY25.