India's New Trade Compass: Growth, Diversification, Leadership

Key Data Points

• Record exports: India's goods + services exports hit ~$820 bn in FY2024–25 (versus $778 bn in 2023–24), including ~$396 bn in merchandise (April–Feb) and ~$355 bn in services ^{Economic Times}.
• Major partners: The EU is India's largest trading partner (12.2% of goods trade, vs 10.8% for the US) ^{EC Trade Policy}. Bilateral EU–India trade was ~$158 bn in 2024 ^TradeImex. The UK and U.S. are also top export markets (~17–18% share each).
• Trade agreements: India recently formalized FTA talks with the U.S. (first-phase terms agreed) and with the EU (committed to conclude by end-2025). India–UK negotiators say 90% of the FTA is agreed and hope to finalize it this year ^{The Guardian}. India is also reviving talks on a preferential pact with South Africa/SACU (India–South Africa trade was $19.25 bn in FY2023‑24 ^{Business Standard}).
• Tariff policy: Budget 2025 scrapped duties on key inputs – e.g. EV battery and phone components – to spur "Make in India" manufacturing. Simultaneously, New Delhi signaled willingness to cut tariffs on >$23 bn of U.S. imports in a first-phase deal, part of efforts to neutralize retaliatory tariffs abroad.
• Supply chains: Globally, nearly 48% of Indian firms are diversifying supply sources and ~26% cite new-market access as their top motive. Moreover, 27% of Indian companies report shifting supply chains back to India (vs 20% worldwide)^{The Economist} – aligning with the government's push for domestic production.

Major Trade Agreements and Initiatives

India is aggressively pursuing new FTAs to lock in market access. Talks with the European Union have picked up pace: leaders agreed this year to "phase" an FTA with rapid tariff cuts on goods, while deferring sensitive chapters (services, procurement). For example, textiles and autos were discussed in recent rounds. The goal is to conclude by end‑2025, driven by global uncertainty.

If achieved, liberalized EU access could be transformative: Indian textiles now face 12–16% EU tariffs, far above rivals like Bangladesh/Vietnam, so an FTA could give India's garment industry a major boost. The EU, in turn, is pressing India to cut its 100–150% tariffs on imports like cars, dairy and wine^{Financial Express} – a key negotiation front.

U.S.–India trade relations are also accelerating under the current global backdrop. In early April, India and the U.S. agreed on the terms of reference for the first phase of a bilateral trade deal. Both sides hope to shape a "mutually beneficial" pact within 90 days. India reportedly is ready to cut tariffs on more than half of ~$23 bn of U.S. imports in this first tranche.

Critically, a 90-day pause on U.S. reciprocal tariffs for India has given exporters breathing room. With U.S. and China now escalating tariffs, India's ongoing talks (targeting $500 bn two-way trade by 2030) position it as an alternative sourcing base for American firms and as a key player in the Indo-Pacific trade landscape.

Sectoral and Policy Shifts

On the ground, policy changes are reshaping sectors with global impact. The 2025 budget announced zero import duties on crucial EV-battery components (35 items) and on parts for mobile phones. This aims to kickstart local manufacturing of lithium-ion batteries and smartphones – both high-growth areas – by slashing the cost of inputs.

These exemptions dovetail with India's broader "Make in India" push: even as exports bloom, firms are reinvesting at home. In practice, battery manufacturers from Amara Raja to Tata are scaling up gigafactories, and eased import rules will help them access critical raw materials cheaply.

Textiles remain a shining sector. India's labor-intensive exports have thrived even amid global slowdowns – helped by recent free-trade deals (e.g. with the UAE and Australia). A potential EU FTA would further reduce European tariffs (currently 12–16% on many garments), letting India compete with smaller Asian exporters. Pharma and gems/jewelry are other traditional strengths likely to gain from expanded market access.

In autos and electronics, policy is more mixed. India still maintains very high tariffs (up to ~100%) on imported cars – a major point of contention in all FTAs. UK officials note that slashing India's car tariff could "dramatically" boost exports like automobiles and scotch whisky. China-developed EV makers (e.g. Tesla) have complained about India's auto duties, but trade talks may change that calculus.

Global Implications and Opportunities

India's trade trajectory has clear global ramifications. As protectionism and geopolitical blocs arise elsewhere, India is carving a different path – often one that Western companies find attractive. Its massive economy (projected ~8% growth by IMF) and large middle class make it a critical consumer and supplier.

FTAs with the EU and UK will give foreign businesses unprecedented access (e.g. duty-free exports of cars or whisky to India) while securing Indian firms cheaper access to developed markets. The U.S. deal under negotiation, if successful, could reorient Asian supply chains away from China and toward India for electronics, chemicals and agriculture.

For businesses worldwide, India's moves signal both challenges and openings. On one hand, higher U.S. and EU market tariffs may reroute goods via India (or vice versa). On the other, India itself is becoming more open in targeted areas – meaning companies can form joint ventures or set up plants to tap India's cost advantage.

The government's "neutral" trade stance – 80% of local executives view it as a stability factor – suggests fewer cross-country frictions than in other regions. Indeed, international firms from Japan to the GCC are already using India as a back-up manufacturing base. Supply-chain resilience (e.g. in auto parts, solar panels or pharmaceuticals) is a major driver: India's policy changes in EV batteries and electronics parts will make it easier for global suppliers to integrate Indian sites into their networks.

Conclusion

India's recent trade moves are not just incremental tweaks but a strategic pivot. By finalizing agreements (with the EU, U.S., UK and others), reforming tariffs (especially on EV and tech inputs), and targeting high-growth sectors (like clean energy and digital), India is securing its place in the new global order.

For businesses and investors, the takeaway is clear: India's market is opening in important areas even as it safeguards others, offering fresh avenues for growth. As one trade adviser noted, India's "non-aligned" diplomacy and rapid domestic reforms make it a stable alternative amid global trade uncertainty. The world will be watching — and many firms will be planning — accordingly.