India Beyond the US: A New Era of Global Partnerships
Volatility in global markets often arises not solely from financial statements but from geopolitics, policy shifts, and strategic uncertainty. Currently, the ongoing suspense surrounding India–US trade negotiations adds an extra layer of caution for exporters and investors. While both nations strive for a mutually beneficial deal, concerns about potential tariff disruptions loom large.
The United States: India’s Largest Export Anchor
The significance of the United States in India’s trade landscape is undeniable. In FY24–25, the US represented nearly 20% of India’s total exports, valued at USD 86.5 billion, making it the country’s largest export destination. Key sectors benefiting from this trade relationship include:
– Engineering goods
– Electronics
– Pharmaceuticals
– Gems and jewellery
– Textiles
Strategic Export Diversification
Amidst this reliance, India is proactively diversifying its export markets to mitigate dependence on a single geography. Rather than waiting for clarity in US negotiations, India has been expanding its export corridors across:
– Europe
– The Middle East
– Oceania (including markets like Australia and New Zealand)
– Latin America
India–European Union Free Trade Agreement: A Game Changer
A landmark step in this diversification is the recently concluded Free Trade Agreement (FTA) with the European Union, often hailed as the “mother of all trade deals.” Highlights of the agreement include:
– Elimination of tariffs on over 99% of Indian exports to the EU, currently valued at approximately USD 75.76 billion.
– Opening key segments of the Indian market to EU participants.
– Aiming to almost double bilateral trade volumes between India and the EU.
For the textiles sector, this agreement is transformative, as India faced higher tariffs in Europe compared to competitors like Vietnam and Bangladesh. The reduction in tariffs levels the playing field, allowing Indian textile firms to thrive in the world’s second-largest export market.
Similarly, the electronics sector is set to gain substantially. Currently, about 38% of India’s electronics exports are directed towards the US. In contrast, the EU represents a colossal USD 750 billion electronics market, where India’s current presence is under USD 100 billion. The FTA enables Indian manufacturers to diversify revenue streams and expand significantly in Europe.
Furthermore, other sectors like pharmaceuticals, gems and jewellery, and engineering goods are poised to tap into this high-value consumer base, resulting in volume growth and pricing stability.
Expanding the Trade Map
In addition to the EU agreement, India has also signed a trade deal with the United Kingdom, which currently accounts for around 3.5% of India’s exports. This new framework offers duty-free access on 99% of Indian goods and aims for a bilateral trade target of USD 100 billion in the coming years.
India has also inked FTAs with Oman and New Zealand, enhancing its strategic presence in these markets. Negotiations are underway with countries including:
– Australia
– Chile
– Peru
– Korea
– Maldives
These efforts reflect India’s ambition to establish diverse trade partnerships, particularly in light of potential global protectionist trends.
Strengthening Middle East and Asia Corridors
Beyond established agreements, India is actively repairing relationships with nations like Canada and deepening engagement with the UAE—India’s second-largest trade partner—aiming to double bilateral trade to USD 200 billion by 2032.
Conclusion
From an investor’s perspective, this is not just about trade numbers; it is about strategic risk management. While the US will undoubtedly remain a crucial partner for India, the country is working to ensure that no single nation holds excessive influence over its export-driven sectors or overall economic growth. This diversification enhances negotiating power, economic stability, and long-term resilience.
In a world where markets react sensitively to news regarding India–US negotiations, it is essential to recognize the broader transformation unfolding in India’s global economic landscape. India is not passively waiting for trade resolutions; it is actively reshaping its role on the world stage.