The post–Cold War era witnessed the dominance of free trade and multilateralism under institutions like the WTO. However, in recent years, there is a global drift towards protectionism, economic nationalism, and bilateral trade deals. This trend poses multiple challenges for an open, emerging economy like India.

The global trade war escalated to $1.7 trillion in 2023, with major economies imposing tariffs affecting India's $824.9 billion export target for FY 2024-25.

Challenges Before the Indian Economy

Trade and Export Challenges:

• Market Access Restrictions: US-China trade tensions and EU's Carbon Border Adjustment Mechanism limiting India's steel and aluminum exports
• Supply Chain Fragmentation: Global shifts (US–China trade war, pandemic-induced reshoring, friend-shoring) affect India’s role in global value chains, increasing vulnerability of industries like electronics and auto components.
• Tariff Wars: Retaliatory duties affecting key sectors like textiles, pharmaceuticals, and IT services
• Export Dependency Risk: India’s growth strategy relies on expanding exports (IT services, pharma, textiles, agri products). Protectionist barriers in the US, EU, and other markets limit market access.
• Standards and Regulations: Non-tariff barriers through stringent quality standards in developed markets

Investment and Technology Challenges:

• FDI Uncertainty: Geopolitical tensions affecting long-term investment commitments, evident in China+1 strategy
• Technology Transfer Barriers: Restrictions on critical technologies like semiconductors and 5G equipment
• Financial Market Volatility: Trade wars causing currency fluctuations and capital flow disruptions
• Industrial Competitiveness: Rising input costs due to supply chain disruptions affecting manufacturing
• Innovation Access: Limited access to R&D collaborations and technology partnerships

How These Challenges Can Be Met

Strategic Trade Diversification:

• New Market Penetration: Expanding trade with Africa through India-Africa Forum Summit initiatives and Latin American partnerships
• Bilateral Trade Agreements: Operationalizing India-UAE CEPA (achieved 16% trade growth) and fast-tracking India-UK FTA
• Regional Partnerships: Strengthening ASEAN ties and exploring Indo-Pacific Economic Framework opportunities
• South-South Cooperation: Leveraging BRICS platform for alternative trade arrangements
• Sectoral Focus: Promoting services exports through GES-2.0 and digital trade agreements

Domestic Resilience Building:

• Import Substitution: Scaling PLI schemes across 14 sectors with ₹1.97 lakh crore allocation
• Infrastructure Development: Completing National Logistics Policy implementation for cost reduction
• Skill Enhancement: Expanding Skill India Mission for global competitiveness in emerging technologies
• Manufacturing Hubs: Establishing sector-specific clusters through National Industrial Corridor Development Program
• Digital Transformation: Leveraging India Stack for efficient trade facilitation and compliance

India must navigate protectionism through strategic autonomy while maintaining openness, as demonstrated by recent Semiconductor Mission and Green Hydrogen Mission initiatives.