Bold leap forward, now the tightrope walk

In the midst of unprecedented geopolitical uncertainty, India’s government has moved decisively, with boldness, to ensure that the country becomes more closely integrated with the global economy. The conclusion of India-EU trade talks a few weeks ago, now followed by a joint India-US statement on a framework for an Interim Agreement, marks a pivot of what could be said to be a protectionist nation to arguably one of the world’s more open economies. With these deals and agreements with countries such as Australia, New Zealand, UK, UAE, and groupings such as ASEAN, India has trade pacts with most economic regions of the world. Read alongside the recent dismantling of non-tariff barriers such as quality-control orders, the unmistakable conclusion is of a recasting of India’s trade policy as one that embraces freer trade. There is no going back from here.

Trade deals such as these, which have paved the way for greater market access for Indian exports, necessarily involve give and take. After all, countries can hardly be expected to open up their markets to Indian exports without expecting reciprocity. The tall tariff walls that have protected large sections of the Indian economy had to go. While the consequences of these deals will unfold in the years to come, it would be fair to say that they could potentially trigger far-reaching changes in the economy. India’s labour intensive export segments should benefit considerably — these agreements now place India more favourably than its East Asian competitors such as Vietnam and Indonesia — facilitating the economy’s wider transformation and labour mobility. Delhi must now double down on domestic reforms and pursue the export-led growth model that has propelled the rise of many nations. At the same time, the government has been careful to safeguard sensitive sectors such as agriculture in these deals, while the contentious issue of purchase of Russian oil remains an unknown.

Donald Trump’s monitoring mechanism of India’s Russian purchases is clearly a pressure tactic — energy deals are bargaining chips on his table. India’s interlocutors have shown remarkable deftness in managing and negotiating their way through. As they move towards the final agreement, the challenge, in this unpredictable Trump world, will always be to balance pressure with opportunity. That’s a tightrope walk no doubt, but after their bold leap forward, the interlocutors will have to be cautious as they figure out their next steps. The terrain remains tricky — but now it’s not too unfamiliar.