In today’s stormy, growingly protectionist global trade environment, India’s instinct for self-reliance could be a foil to that overreach. Of course, the great exception for fiscal orthodoxy is India, which is the world’s fifth-largest and indeed fastest-growing major economy. Its relative insulation from the workings of global trade has allowed the country to weather economic tsunamis that have decimated other, more trade-dependent economies. Meanwhile, the United States is accelerating efforts to include new tariff provisions. Consequently, the pressure on Indian exports will be enormous, leaving many to worry about the country’s long-term position in international trade.
In recent years, India’s exports of goods and services surged six-fold, growing from $75 billion in 2002-03 to over $400 billion by 2011-12. Now, even as the sector booms, a turn away from Washington towards more protectionist policies has only caused exports to flat-line. Today, Indian products have become uncompetitive in global markets, and the country’s share of global exports is still under 2%. As a result, high tariffs on imports have pushed this production out. Indeed, they warn that India should reconsider the course it has charted in trade policy.
The specter of new US tariffs is a more immediate and grave threat. According to analysts, doing this could result in a loss of exports from India to the American market by $7.76 billion, a reduction of 6.4%. In 2024, Indian exports to the U.S. market amounted to $89 billion. The implications of this potential drop are significant for an economy that has relied heavily on its vast domestic market to fuel growth amid slowdowns elsewhere.
India’s past decisions are a mirror to its sensitive trade disposition. From 1966–1991, India started following that typical model of import substitution. This choice would prove to be the crux that distinguished it from its Asian fellow travelers, such as Taiwan, South Korea, and Singapore. This decision was based on a long-held anti-international commerce sentiment that viewed trade as a type of neo-colonialism. As Vivek Dehejia points out, “Many post-colonial states like India harbour a deep-rooted suspicion that international commerce and trade are simply new forms of colonisation.”
Despite these challenges, India’s lower exposure to global goods trade may prove advantageous if export-driven economies face further tariff pressures. Rajeswari Sengupta suggests that “if export-driven economies slow down under tariff pressure, and we continue growing at 6%, we’ll start looking stronger by comparison—especially with our large domestic market to fall back on.” Supporters of this view argue the resilience of India’s economy against external shocks, such as the invasion of Ukraine by Russia and rising commodity prices.
Experts caution against complacency. To regain its lost competitiveness in global markets, India will have to make some strategic recalibrations. Viral Acharya notes that “tariffs have created protectionism in several Indian industries, disincentivising investments in efficiency by cosy incumbents.” To mitigate these effects, analysts assert that India must lower its tariffs and signal a willingness to engage more openly with global trade.
The country’s economic trajectory has improved significantly since it dismantled many import controls and allowed the rupee to depreciate in 1991. That shift was a godsend to exporters and domestic producers who compete with imports. In the first 17 years of the 21st century, India’s per capita income more than quadrupled. This stunning economic expansion, which exceeded all of the income growth achieved in the 20th century combined, brought free market benefits to millions.
As new tariffs put Indian exports on very unstable ground, Indian policymakers are caught at a difficult shoreline. Ajay Srivastava notes that “the Trump tariffs are expected to deliver a mild blow to India’s merchandise exports to the US.” With this existential threat on the horizon, it is necessary for India to take a hard look at its trade policies and move in the opposite direction.
Rajeswari Sengupta emphasizes the need for a balanced approach: “Being trade-shy has turned into an advantage—but we can’t afford complacency. To seize new opportunities, India must stay nimble and open up more to trade gradually and strategically.” This feeling further highlights the need for flexibility when it comes to a constantly changing world.