New playbook for reforms needed

A high-level committee should be set up to review India’s trade and Customs regulations, and undertake economic impact analyses of trade agreements

- MUKESH BUTANI & SPANDANA KOONA

“Economic theories teach us about the efficiency of markets, but when it comes to international business, it's the inefficiencies that often create the greatest opportunities.” — Craig Maginness in Go Glocal: The Definitive Guide to Success in Entering International Markets.

As international trade sways the rapidly changing global order like a caffeinated businessman with a wishlist of optics and redundancies, India prepares itself for a defining Budget Day. The Budget comes at a seemingly opportune time: India has just overtaken Japan to become the fourth-largest economy in the world, its economy is expected to aerobicize by a healthy 7.4 per cent in FY2025-26, and the nation is being viewed as a priority jurisdiction for data centres and technologies of the future by leading players. However, the gung-ho vitality for India’s ascendancy must be examined from the lens of what ails and obfuscates its domestic policies to ensure a holistic investment Eden for foreign investors and institutional titans.

The FDI-FTA connect

Successive governments have pursued an investor-friendly Foreign Direct Investment (FDI) policy for most of the sectors to be open for 100 percent FDI via automatic route. The writing was always on the wall: FDI inflows skyrocketed from $36.05 billion in FY2013-14 to $81.04 billion in FY2024-25, a gigantic 124 per cent increase over the last decade.

While the 2025-26 figures are expected to repeat the magic, India’s ambitions were marred by a largely fragmented geopolitical order. Case in point: FDI inflows fell sharply to an average of $6.54 billion per month during the October to December 2025 period on account of external uncertainties, tensions around the date of finalisation of the India-US trade deal, and increased repatriation.