APPROACH
The Introduction: Talk about the increasing instances of inward looking policies in the global trade
The Body
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- Elaborate various challenges which the Indian economy faces due to these development
- Give arguments as to how these challenges can be overcome
The Conclusion: Sum up the whole discussion in a small paragraph with a concluding remark
The Introduction:
For three decades, globalization and multilateralism under WTO (since 1995) boosted world trade. India also gained as its merchandise exports rose from about 40 billion USD in 2000 to more than 440 billion USD in 2024-25. But, rising protectionism, bilateral trade deals and weakening of WTO mechanisms are reshaping global trade. It poses real challenges for India which is aiming at 2 trillion USD exports by 2030.
The Body
Challenges for India
1. Steep U.S. Tariffs on Indian goods: In August 2025, the U.S. raised tariffs on most Indian exports to 50%, hitting labour-intensive sectors like textiles, gems & jewellery, auto components and seafood . This threatens more than 85 billion USD worth of U.S.-bound goods.
2. Global trade slowdown: WTO now forecasts 0.2% contraction in merchandise trade for 2025, down sharply from earlier expectations of 2.9% growth. Global trade uncertainty is reducing demand for Indian exports.
3. Exposure to geopolitical shocks: Crises such as the Russia–Ukraine war, Middle-East tensions and shifts in sourcing patterns (like favouring Vietnam over India) raise risks to trade continuity and diversification.
4. Erosion of multilateral frameworks: WTO’s dispute settlement is non-functional. Developed nations are increasingly reverting to unilateral tariffs and bilateral pacts, weakening platforms where India can negotiate collectively.
5. Internal pressures and competitiveness challenges: Domestic challenges such as limited productivity, high logistics cost and poor contingency planning cripple India’s ability to adapt quickly when global policy shocks occur.
Overcoming challenges
1. Strengthening bilateral FTAs: India has signed FTAs with UAE, Australia, EFTA and more recently with UK and is negotiating with EU and Gulf Cooperation Council (GCC). These can safeguard market access.
2. Boosting domestic competitiveness: Schemes like PLI, PM Gati Shakti for logistics and next-generation GST reforms (announced by the PM on the Independence Day) are likely to reduce costs and improve scale.
3. Green transition readiness: India must prepare exporters for CBAM-type rules by investing in renewable energy and green steel.
4. Diversifying export markets: The commerce ministry is pushing Indian exporters to explore markets in Latin America, Middle East, Africa and ASEAN to reduce dependence on the U.S.
5. Shift in exports baskets: Moving beyond traditional textiles, gems and IT to electronics, pharmaceuticals and services exports (which already touched 380 billion USD in 2024-25).
6. Building domestic demand: With focus on increasing domestic consumption and Swadeshi drive, India can reduce over-dependence on volatile global demand.
The Conclusion
As global trade turns increasingly protectionist, India risks losing hard-won gains in exports and growth. But through strategic diversification and inclusive policies, the country can turn a crisis into once in a lifetime opportunity. By combining FTAs and resilient domestic supply chains, India can maintain its export momentum, support livelihoods and chart a path toward robust and sustainable growth.
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