Whalesbook
Beyond Reactive Trade Policy
The current enthusiasm for rapid trade expansion faces a reality check. While India concluded landmark agreements with the European Union, the UK, and other partners in early 2026, a new policy report titled 'Resilience in a Fragmenting World: India’s Economic Relations with Great Powers' suggests that the country's trade strategy has become overly reactive. The analysis, produced by the Koan Advisory Group in collaboration with the Chintan Research Foundation, the Information Technology Industry Council, and the Institute of Chinese Studies, argues that trade agreements are frequently being treated as ends in themselves rather than instruments of industrial policy.
The Performance Gap in Existing FTAs
Trade officials and researchers are increasingly questioning the efficacy of India’s existing network of bilateral and multilateral agreements. While total trade volumes have grown, critics point to widening trade deficits with several FTA partners, where imports have outpaced export gains. In some instances, these pacts have allegedly served as conduits for transhipment rather than genuine market access. The report advocates for a forensic audit of these arrangements to determine if they truly contribute to industrial capacity and supply chain resilience. Future negotiations are expected to be evaluated against more rigorous, data-backed market access objectives rather than simple volume targets.
Modernizing Investment Screening
Beyond trade, the report addresses the sensitive issue of foreign direct investment (FDI) amid deepening geopolitical fragmentation. It proposes moving away from blunt, geography-based investment restrictions toward a sophisticated, sector-specific, and national-security-led screening architecture. As India seeks to establish itself as a global electronics and clean energy manufacturing hub, the strategy involves a phased reduction of dependence on Chinese inputs while maintaining openness in non-strategic, economically productive sectors. This represents a nuanced attempt to balance the necessity of global supply chain integration with the imperative of protecting domestic national security interests.
The Risk of Protectionist Headwinds
The push for a more cautious trade stance emerges during a volatile period for Indian exporters. Recent tariff shocks from major trading partners have already forced domestic manufacturers to scramble for diversification. There is growing concern that without stronger institutional coordination, India’s ambitious manufacturing targets could be undermined by persistent supply chain vulnerabilities. Critics also warn that overly restrictive screening mechanisms could unintentionally discourage foreign capital, which remains essential to financing the country’s capital expenditure boom. Policymakers now face the challenge of refining these investment frameworks without stifling the inflow of high-tech capital needed to sustain long-term competitiveness.