It is moving towards trade deals with richer nations so Indian companies can find their niche in global supply chains.

For much of the last few decades, India has been widely perceived as a protectionist power. However, that may now be changing with the Modi government having recently concluded its third significant trade deal since the spring.

This hat-trick of significant economic agreements includes a major trade accord with the UK in May, followed by Oman and New Zealand earlier in December. This may showcase a shift towards agreements that prioritise high-income partners to deepen the integration of Indian industries into global supply chains, balancing domestic and global interests, while sending a signal of greater openness to foreign investors.

The most recent India deal, with New Zealand, aims to boost bilateral trade of around US$1.3 billion in the 2024-2025 financial year. India exported goods worth some US$711 million to New Zealand, while imports from New Zealand amounted to US$587 million.

The New Zealand government asserts that the pact will help its exporters tap India’s economy. Some 95 per cent of New Zealand’s current exports to India will become either tariff-free, or subject to sharply reduced duties. More than half of these products will be duty-free from the first day the pact takes effect.

For India, the agreement not only removes levies on its exports to New Zealand, but also eases mobility rules for Indian students and workers. This is one big reason that Foreign Minister Winston Peters, a key member of the coalition government, is opposed to it in his capacity as leader of the New Zealand First Party.

This changing economic landscape reflects a strategic shift in India’s trade diplomacy, say ruling Bharatiya Janata Party (BJP) officials, including Deputy Chief Minister for Arunachal Pradesh, Chowna Mein. From this perspective, under Prime Minister Narendra Modi’s leadership since 2014, India has embraced international economic integration with greater confidence, positioning itself as a more significant player on the global stage.

As much as there may be significant truth to this, it is tempered by at least two factors. Firstly, while New Delhi is driving new bilateral deals, it has a mixed trade record, overall. For instance, it has often in recent years been a blocker of reform in the consensus-driven World Trade Organization, including those in the areas of multilateral disputes settlement, e-commerce and fisheries, in a bid to protect India’s agricultural sector from greater international competition.

A second key factor is how much of India’s trade momentum appears to have been stepped up in pace during the second Trump presidency. This is more than coincidence – the three trade deals since May represent just under half the total overall trade agreements that the nation has signed in the past five years.

While the Trump tariffs have been a constant source of concern for India in 2025, the game changed dramatically in August, specifically when US President Donald Trump doubled the tariff level to 50 per cent on Indian goods, the highest on any Asian economy.  

That big Trump move shocked Modi, who has, at least temporarily, moved closer to Brics allies China and Russia in recent months, in turn alarming many in the West. 

US Congresswoman Sydney Kamlager-Dove issued a stark warning this month that “Trump’s policies towards India can only be described as cutting our nose to spite our face... damaging strategic trust and mutual understanding... You do not get a Nobel Peace Prize by driving US strategic partners into the arms of our adversaries because – let me be clear – being a coercive partner has a cost”.

Commerce and Industry Minister Piyush Goyal asserted earlier in December that India is set to become the world’s third-largest economy in two to three years, surpassing Japan and Germany, and is targeting an economy of more than US$30 trillion by 2047. He highlighted that New Delhi’s trade strategy has pivoted towards signing agreements with high-income economies: The per-capita GDP of the recent partner countries with which Modi has signed deals is US$20,000, well above that of India.

So this appears a targeted strategy of expanding New Delhi’s global economic footprint, even as negotiating progress with larger trading partners, including the US and EU, remains slow. Other nations with which India hopes to conclude deals include Canada; previous talks hit the buffers in 2023. 

At the global level, India's pivot on trade comes in a context in which other emerging market powers, especially China, have stepped up to make a case for expanding trade in recent years. In 2017, at the World Economic Forum annual meeting, for instance, Chinese President Xi Jinping used the first year of Trump’s initial presidency to defend globalisation in his opening address in Davos.

This stance, which surprised many people at the time, reflects key changes in the global economy since the turn of the millennium, as India and other emerging powers assumed growing importance. Collectively, for instance, the Brics nations now account for around 30 per cent of global GDP, but comparatively smaller totals of world trade and stock of global foreign investment.

India and China, despite their disagreements on some issues such as their common border, both want to become bigger players in trade and investment. In doing so, they are spearheading a campaign for economic globalisation in the face of growing signs, especially from the Trump administration, of greater protectionism. 

The collective economic growth and large populations of India and China, in particular, have lifted a massive number of people out of poverty – an estimated 600 million between 1981 and 2004 in China alone. 

However, the most prominent beneficiaries may have been a much-heralded new middle class, estimated to be as large as a third of the world’s population – disproportionately located in key Asian emerging economies such as India, China and Asean nations including Indonesia. 

Taken together, this is why the Indian trade pivot could be so consequential, globally. If the nascent superpower continues to grow rapidly, potentially becoming the third-largest economy in the world by 2030, its incentives to defend and drive globalisation may only grow.    

Source: The Business Times

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