India is pursuing what business leaders describe as a strategy of “managed openness” as it negotiates major trade agreements with advanced economies, attempting to expand global market access while preserving policy space to support domestic industry, Rajeev Juneja, President of the PHD Chamber of Commerce and Industry (PHDCCI), told BW Businessworld.
The approach shows a broader recalibration of India’s trade philosophy as geopolitical tensions, supply-chain shifts and stalled global trade negotiations reshape the international economic landscape. India is currently deepening economic engagement with the European Union and exploring trade arrangements with the United States, moves that business groups say combine both long-term structural adjustment and tactical responses to global uncertainty.
Juneja said the current negotiations must be viewed in the context of changing global supply chains and weakening multilateral trade frameworks. “India’s engagement with the European Union and agreement with the United States are occurring amid supply-chain diversification away from China, rising geo-economic risk, and stalled multilateralism at the World Trade Organisation,” Juneja said.
He added that the strategy balances immediate adjustments with long-term structural shifts. “As the Economic Survey 2025–26 notes, ‘Global uncertainties are not only pervasive but also deeply structural’, therefore, tactical response is needed when there are shocks to the system,” Juneja said.
India’s approach, however, stops short of full liberalisation. According to Juneja, the country continues to resist binding commitments in sensitive areas such as agriculture, data governance and government procurement. Instead, trade agreements are structured to align India more closely with major markets without compromising the country’s long-standing preference for maintaining policy autonomy.
Business leaders say signs of a deeper structural shift are nevertheless visible in policy measures such as tariff rationalisation and efforts to align regulatory frameworks with global partners, particularly in sectors integrated into global value chains.
Gradual Opening, Not Rapid Liberalisation
India’s trade regime has historically combined openness to foreign capital and technology with selective protection for domestic industries. According to Juneja, the current policy trajectory continues that tradition, favouring gradual reform rather than rapid dismantling of tariffs.
Key signals of a more open economy would include predictable foreign investment rules, stable tax policies and greater access to public procurement markets in line with global norms, he said. “At the same time, only a gradual move towards a fully market-determined mechanism would be beneficial for India’s developing economy,” the president said.
India’s industrial policy currently relies on a combination of tariff protection and targeted incentives, particularly in sectors such as electronics, chemicals, automobiles and steel. Cutting tariffs prematurely could expose domestic firms to international competition before they achieve sufficient scale and productivity gains, he added.
The government’s current approach prioritises liberalisation of inputs and intermediate goods rather than final products. According to Juneja, this sequencing allows domestic manufacturers to reduce production costs while maintaining some protection for finished goods. “A time-bound protection with explicit sunset clauses linked to productivity benchmarks” is the most effective policy design for balancing industrial growth with global competitiveness, he said.
India’s policymakers have increasingly debated how to measure the success of new trade and investment agreements. Traditional metrics such as export growth remain important, but business leaders argue that technology transfer and domestic innovation may prove even more critical.
Juneja said investments in research and development and the creation of high-value products would ultimately determine the long-term success of trade integration. He pointed to recent international assessments suggesting that India’s technological capabilities are improving.
According to the Australian Strategic Policy Institute’s Critical Technology Tracker 2024 report, India’s global ranking in several advanced technologies has improved significantly. In areas such as artificial intelligence, advanced materials, energy systems and aerospace technologies, India’s position has moved to third globally from sixth or lower in previous years.
Juneja said the progress reflects steady improvements in technological capacity, particularly in sectors related to sustainability and energy systems, where India is becoming increasingly relevant internationally.
Supply-chain Fragmentation Creates Opportunity
Despite concerns about global trade fragmentation, business groups say the current environment may actually favour India’s economic strategy. As multinational companies adopt “China+1” sourcing strategies to diversify production bases, India has emerged as a potential alternative manufacturing hub due to its large domestic market, expanding industrial base and favourable geopolitical positioning.
“The global ‘China+1’ strategies favour India to scale up, be part of a larger market size, and position us geopolitically,” Juneja said. However, the shift towards regional blocs and trusted supply networks also means global trade may not return to the fully open system seen in earlier decades.
Instead, India is likely to pursue selective liberalisation with trusted partners rather than universal openness, aligning trade policy with evolving geopolitical realities. While tariff reductions and production-linked incentives often dominate policy discussions, investors frequently prioritise regulatory stability and reliable dispute-resolution systems when evaluating new markets.
Juneja said legal predictability plays a decisive role in attracting long-term capital. “Production incentives without legal predictability raise costs and reduce investment durability,” Juneja said. India has gradually strengthened dispute-resolution mechanisms in recent years, although the system continues to evolve in response to changing economic and geopolitical conditions.
Business groups say clearer regulatory frameworks could have a greater impact on investment decisions than headline policy announcements. Taken together, these policy choices have led many economists and industry leaders to describe India’s economic model as “managed openness”.
Under this framework, the country remains open to international capital, technology and trade partnerships while retaining the ability to intervene in sectors deemed strategically important. Juneja said the model reflects India’s long-standing development strategy. “India is and has always been open to capital and technology, but it should be aligned with national priorities and industry competitiveness,” Juneja said.
Looking ahead, he said trade policy will continue to evolve gradually rather than through a single transformative reform. “Policy reforms are an ongoing process, not a one-time exercise,” Juneja said. The biggest potential risk, he added, would be reform fatigue slowing the pace of economic change. But India’s policy direction remains broadly consistent with incremental liberalisation as global economic conditions evolve.
For now, that means India’s trade policy will likely continue to combine selective protection with expanding international engagement — a balancing act that reflects both the opportunities and constraints of a rapidly shifting global economy. |
