The global economic order is shifting from open multilateral trading arrangements governed by the World Trade Organization (WTO) toward economic nationalism, tariff walls, and bilateral trade alignments. The Economic Survey 2025 highlights that geoeconomic fragmentation poses structural challenges to India’s export competitiveness, investment inflows, and trade growth.

Key Challenges Before the Indian Economy

• Erosion of Export Market Access: Escalating unilateral tariffs and non-tariff barriers—such as the European Union’s Carbon Border Adjustment Mechanism (CBAM) and strict US compliance standards—impose higher costs on Indian steel, aluminum, and manufacturing exports.
• Cross-Border Investment Scrutiny: Advanced economies are tightening screening on foreign direct investment (FDI) and outbound mergers, making it harder for Indian enterprises to acquire overseas technology assets in strategic sectors.
• Imported Inflation and Supply Disruptions: Unilateral export curbs on critical minerals, fertilizers, and energy commodities by major powers expose India to imported inflation and balance-of-payments volatility.
• Restrictions on Services and Skilled Labor Mobility: Rising protectionism in developed markets introduces tighter visa regimes (e.g., H-1B caps) and stringent cross-border data localization laws, constraining India’s IT-BPM exports.
• Capital Flight and Currency Volatility: Global geoeconomic tensions often trigger foreign portfolio investment (FPI) outflows toward traditional safe havens, weakening the Indian Rupee and increasing external borrowing costs.

Strategic Measures to Address These Challenges

• Geographical Export Diversification: Expand bilateral trade footprints in non-traditional high-growth markets across Africa, Latin America, Central Asia, and the Middle East, utilizing frameworks like the India-UAE CEPA.
• Strengthening Domestic Industrial Base: Scale up the Production Linked Incentive (PLI) scheme and “Make in India” to build competitive manufacturing clusters in electronics, pharmaceuticals, and active pharmaceutical ingredients (APIs).
• Pursuing Balanced Bilateral FTAs: Finalize modern, comprehensive trade agreements with key advanced economies (e.g., UK, EU, EFTA) to secure reduced tariffs and reciprocal service-market access.
• Integration into Global Value Chains (GVCs): Position India as an alternative manufacturing hub under the “China+1” diversification strategy, improving port logistics and lowering customs clearance turnaround times.
• Promoting Domestic Currency Settlement: Expand bilateral trade settlement mechanisms in Indian Rupees (INR) and develop cross-border UPI linkages to reduce reliance on single-currency international clearing channels.

India can navigate global protectionism by pairing targeted industrial policy with pragmatic bilateral trade agreements, strengthening its position as a reliable global supply-chain partner.