1. Context: Global Economic Transformation

• The global economy is witnessing:
  
  
  • Shifts in trade policies.
    
    
  • Rising geopolitical tensions.
    
    
  • Reevaluation of trade agreements and tariffs.
    
    
• These trends impact global trade, capital flows, and financial markets.
  
  

2. India’s Export Vulnerability

• USA is India’s largest export destination (~20% of exports).
  
  
• Sectors like marine, apparels, carpets, gems & jewellery, pharma, auto components are at high risk.
  
  
• Increased US tariffs and slowdown can hurt Indian MSMEs and export earnings.
  
  

3. Short-Term Challenges

• Rising logistics costs.
  
  
• Disrupted supply chains.
  
  
• Asymmetric information about trade measures.
  
  
• Dumping threats from countries like China and ASEAN nations redirecting exports to India.
  
  

4. Need for Strategic Response

• India must restructure supply chains and improve resilience.
  
  
• Requires a three-pronged strategy:
  
  
  1. Domestic shock absorption (policy buffers, inflation control).
     
     
  2. Leveraging external opportunities (new trade agreements).
     
     
  3. Policy support for industry competitiveness (ease of doing business, subsidies, PLI schemes).
     
     

5. Trade Agreements as Leverage

• India is negotiating:
  
  
  • Bilateral Trade and Economic Partnership Agreement (BTEPA) with the US.
    
    
  • FTAs with EU, UK, Australia.
    
    
• These deals are important to:
  
  
  • Secure market access.
    
    
  • Avoid non-tariff barriers.
    
    
  • Promote domestic industry participation in global value chains.
    
    

6. Steps Suggested in the Editorial

• Strengthen early warning systems: To counter dumping and import surges.
  
  
• Sustain public capital expenditure: Helps cushion domestic economy in downturns.
  
  
• Continue monetary easing: Inflation is moderating, creating room for lower interest rates.
  
  
• Support diversification of markets: Expand exports to Vietnam, China, other Asian countries.
  
  
• Focus on productivity-linked incentive (PLI) schemes: Target next-gen sectors like electronics, green hydrogen, batteries, and semiconductors.
  
  

7. Long-Term Vision

• India can benefit from global trade restructuring by:
  
  
  • Becoming a reliable part of global supply chains.
    
    
  • Improving logistics, reducing regulatory hurdles.
    
    
  • Creating a stable trade and investment policy environment.
    
    

 UPSC-Style Questions (GS3 – Indian Economy)

🔹 10-Marker (150 Words)

How do global trade policy shifts affect India’s export-dependent sectors? Discuss with recent examples.