India’s trade strategy in a multipolar world

UPSC Prelims + Mains Study Note

1. At a Glance

• India is transitioning from a cautious, regionally-focused FTA posture (pre-2021) to an aggressive, globally-integrated trade strategy targeting advanced economies. [1]
• The Foreign Trade Policy 2023 (FTP 2023) sets a target of $2 trillion in total exports by 2030, anchored in the doctrine of Strategic Autonomy — engaging all major powers without binding alignment. [2][5]
• India's FTA coverage of its export basket is projected to rise from ~22% (2019) to ~71% (2026) — a tripling in seven years. [1]
• Directly relevant to GS-II (International Relations) and GS-III (Economy/Trade) — frequently appears in both Prelims MCQs and Mains essays.

2. Why in the News

• February 2025 (CII Article, Hindu BusinessLine): Chandrajit Banerjee (DG, CII) articulated India's evolving trade strategy as a deliberate pivot toward comprehensive FTAs with developed economies — EU, UK, GCC — previously considered difficult to negotiate. [1]
• 2025 Year-End Review (Department of Commerce): India recorded 6.05% annual growth in merchandise + services exports, reaching $825.25 billion in total exports. [1][3]
• India–UK CETA concluded (2025): Provides duty-free access to 99% of India's exports to the UK, covering nearly 100% of trade value. [4]
• India–Oman CEPA signed: 18 December 2025. [4]
• Export Promotion Mission approved: 12 November 2025, outlay ₹25,060 crore (FY 2025–26 to 2030–31). [4]

3. Background & Evolution

Predecessors: FTP 2015–20 (extended twice); MEIS/SEIS (replaced by RoDTEP/RoSCTL as WTO-compatible alternatives) [6]

4. Core Static Facts

Foreign Trade Policy 2023

• Launched: 31 March 2023, New Delhi [5]
• Nodal Ministry: Ministry of Commerce and Industry (Department of Commerce)
• Four pillars: (i) Incentive to Remission, (ii) Export promotion through collaboration (Exporters, States, Districts, Missions), (iii) Ease of doing business / e-initiatives, (iv) Emerging areas — E-Commerce, Districts as Export Hubs, SCOMET policy [5]
• Export target: $2 trillion by 2030 (merchandise + services combined) [2][5]
• 2025 total exports: $825.25 billion (+6.05% YoY) [1][3]

FTA Landscape

• FTA coverage of export basket: ~22% (2019) → ~71% (projected, 2026) [1]
• Active CEPAs/FTAs: UAE, Australia, Mauritius, South Korea, Japan, ASEAN, SAARC/SAFTA, Sri Lanka, Singapore, Malaysia
• Recent additions (2024-25): India–UK CETA (99% duty-free access), India–Oman CEPA (18 Dec 2025), Israel FTA Terms of Reference (Nov 2025) [4]
• Under negotiation: EU FTA (relaunched 2022), GCC FTA, India–Canada CEPA (stalled)

Export Promotion Mission

• Approved: 12 November 2025 [4]
• Outlay: ₹25,060 crore, FY 2025–26 to 2030–31
• Nodal Ministry: Ministry of Commerce and Industry

WTO Compliance

• RoDTEP (Remission of Duties and Taxes on Exported Products) — WTO-compatible replacement for MEIS [6]
• India's trade is reviewed under the WTO Trade Policy Review mechanism [7]

5. Multi-Dimensional Analysis

Economic

• Combined exports of $825.25 billion in 2025 position India as a top-10 global trading nation; government targets $1 trillion in goods + services exports in near term and $2 trillion by 2030. [1][2]
• Services exports (IT, BPO, financial services) are a key pillar; India holds ~4% of global commercial services exports.
• FTA network expansion projected to unlock new markets — duty-free access to UK's £700 bn+ consumer market via CETA. [4]
• Districts as Export Hubs scheme under FTP 2023 aims to decentralise export production to Tier-2/3 districts. [5]

Geopolitical / Strategic

• India's doctrine of Strategic Autonomy: simultaneously negotiating FTAs with the US, EU, UK, and GCC while maintaining ties with Russia and Global South — a deliberate non-alignment in trade blocs. [1]
• RCEP exit (2019) was a strategic choice to avoid structural trade deficits with China; India remains the only major Asian economy outside RCEP.
• India–Israel FTA ToR (Nov 2025) covers fintech, AI, quantum computing, pharma, space, defence — demonstrates convergence of trade and tech-security interests. [4]
• India's role in I2U2 (India–Israel–UAE–US) and IMEC (India-Middle East-Europe Economic Corridor) integrates trade routes with strategic infrastructure.

Economic (Domestic Competitiveness)

• India's high tariff binding overhang (WTO bound rates often far above applied rates) gives policy flexibility but creates uncertainty for trade partners — noted in WTO TPR. [7]
• Non-tariff barriers (NTBs) — SPS measures, standards — remain a friction point in EU and US negotiations.

Legal / Constitutional

• Foreign Trade (Development and Regulation) Act, 1992 — statutory basis for FTP; empowers Centre to regulate imports/exports.
• SCOMET (Special Chemicals, Organisms, Materials, Equipment and Technologies) export control list — dual-use items; FTP 2023 streamlines this. [5]
• FTAs are executive agreements (Cabinet approval); no mandatory parliamentary ratification under Indian law — constitutional debate ongoing.

Administrative

• Directorate General of Foreign Trade (DGFT) under MoCI — primary implementing body for FTP.
• State-level export promotion via State Export Promotion Committees — federal coordination challenge.
• E-Commerce exports identified as high-growth channel; regulatory sandbox under formation.

Historical

• India's FTA posture mirrors Japan's 2002–2010 EPA expansion — moving from regional to global agreements as domestic manufacturing matured.
• Post-COVID global supply chain reconfiguration ("China+1" strategy) accelerated India's attractiveness as an FTA partner.

6. Recent Developments (Last 12–18 Months)

• Nov 2025: Export Promotion Mission approved; ₹25,060 cr outlay over 5 years. [4]
• Nov 2025: India–Israel FTA Terms of Reference signed; focus sectors: AI, quantum, pharma, defence. [4]
• Dec 2025 (18th): India–Oman CEPA signed. [4]
• 2025: India–UK CETA concluded — 99% of Indian goods get duty-free UK access; covers ~100% trade value. [4]
• 2025: India–New Zealand FTA concluded — one of India's fastest-concluded agreements; positions India as gateway to Oceania/Pacific Island markets. [4]
• 2025: Department of Commerce Year-End Review confirmed $825.25 bn total exports (+6.05% YoY). [3]
• 2025–26: GCC FTA negotiations ongoing; Qatar bilateral exploration underway. [4]
• 2023 (FTP baseline): FTP 2023 launched 31 March 2023, replacing extended FTP 2015–20; introduced dynamic, open-ended policy (no fixed expiry). [5]

7. Prelims Hooks

1. India's total exports (merchandise + services) in 2025: $825.25 billion, a 6.05% annual increase. [1][3]
2. FTP 2023 was launched on 31 March 2023 by the Ministry of Commerce and Industry. [5]
3. Target: India aims to reach $2 trillion in total exports by 2030 under FTP 2023. [2][5]
4. India's FTA export basket coverage: ~22% in 2019 → projected ~71% by 2026. [1]
5. India exited RCEP in November 2019 (at Bangkok Summit) citing asymmetric trade deficits; the only major Asian economy outside it.
6. India–UK CETA (2025): Provides duty-free access on 99% of India's exports to the UK. [4]
7. India–Oman CEPA was signed on 18 December 2025. [4]
8. Export Promotion Mission approved 12 November 2025; outlay ₹25,060 crore (FY26–FY31). [4]
9. RoDTEP (Remission of Duties and Taxes on Exported Products) is a WTO-compatible export incentive scheme, replacing the earlier MEIS. [6]
10. FTP 2023 pillars (4): (i) Incentive to Remission, (ii) Collaboration (exporters/states/districts/missions), (iii) Ease of doing business, (iv) Emerging areas (e-commerce, export hubs, SCOMET). [5]
11. Statutory basis for India's Foreign Trade Policy: Foreign Trade (Development and Regulation) Act, 1992.
12. Implementing body for FTP: Directorate General of Foreign Trade (DGFT), under Ministry of Commerce and Industry.
13. India–Israel FTA Terms of Reference signed November 2025; priority sectors include AI, quantum computing, pharma, and space. [4]
14. India's first CEPA with a Gulf nation was with the UAE (April 2022), concluded in just 88 days.
15. Districts as Export Hubs is a key initiative under FTP 2023 to decentralise export production. [5]

8. Mains Relevance

GS Papers:

• GS-II: India's foreign policy; bilateral/multilateral groupings; effect of policies of developed/developing countries on India's interests
• GS-III: Indian economy; effects of liberalisation on the economy; infrastructure; investment models; trade and balance of payments

Specific syllabus headings:

• GS-II: "Bilateral, regional and global groupings and agreements involving India and/or affecting India's interests"
• GS-III: "Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment"

Plausible Mains Questions:

1. "India's exit from RCEP in 2019 was a strategic retreat, but its FTA expansion since 2022 suggests a more confident re-engagement with global trade. Critically examine India's evolving trade strategy in a multipolar world." (GS-II/III)
2. "Evaluate the significance of India's Foreign Trade Policy 2023 in achieving the $2 trillion export target by 2030. What structural reforms are still needed?" (GS-III)
3. "How does the principle of Strategic Autonomy shape India's approach to bilateral and multilateral trade agreements? Illustrate with recent examples." (GS-II)

9. Related Topics to Study Next

10. Common Errors / Trap Areas

1. MEIS vs RoDTEP confusion: MEIS was scrapped as WTO-incompatible (ruled against in 2019 dispute). Its replacement is RoDTEP (WTO-compatible). Don't credit MEIS as current policy.
2. FTP 2023 launch date: Aspirants often say "2022" — the correct date is 31 March 2023. FTP 2015–20 was extended multiple times (including one 6-month extension) before being replaced.
3. RCEP exit year: India exited at the November 2019 Bangkok ASEAN Summit, not in 2020. The agreement was signed by 15 nations in November 2020 without India.
4. India–UAE CEPA vs India–UK CETA: These are different agreements with different scopes. UAE CEPA (2022) is goods-heavy; UK CETA (2025) covers 99% of goods + services + investment. Don't conflate them.
5. "FTA coverage" metric: The ~71% figure refers to share of India's export basket covered under FTA networks — it does not mean 71% of trade is actually preferential. Utilisation rates of FTAs often remain low (a separate issue).
6. Ministry confusion: FTP is under Ministry of Commerce and Industry (Department of Commerce). Do not confuse with Ministry of Finance or MEA, even though they are stakeholders in FTA negotiations.