Q. What are the challenges before the Indian economy when the world is moving away from free trade and multilateralism to protectionism and bilateralism? How can these challenges be met?

Model Answer:

The global shift towards “slowbalisation,” marked by protectionism, friend-shoring, and WTO paralysis, poses critical structural risks to India’s export-led growth ambitions.

1. Challenges for the Indian Economy

• Export Competitiveness: Rising non-tariff barriers and unilateral tariffs threaten key Indian exports (e.g., EU-CBAM impact on domestic steel/aluminum).
• Supply Chain Vulnerability: Tech-nationalism and export controls disrupt access to critical technological imports (e.g., semiconductors, critical minerals).
• FDI Diversion: Reallocation of global capital toward geopolitical allies via “friend-shoring” limits India’s foreign direct investment inflows.
• Weakened Dispute Redressal: The persistent paralysis of the WTO Appellate Body removes institutional shields against arbitrary, developed-world trade barriers.

2. Strategies to Meet the Challenges

• Agile Bilateral Integration: Fast-track comprehensive, fair Free Trade Agreements (FTAs) with strategic partners (e.g., India-UAE CEPA, Australia ECTA).
• Domestic Resilience: Boost manufacturing competitiveness and reduce critical import dependencies through targeted subsidies (e.g., PLI Scheme, National Logistics Policy).
• Capitalizing on ‘China+1’: Rapidly improve infrastructure and contract enforcement to attract shifting Global Value Chains (GVCs).
• Plurilateral Coalitions: Champion Global South interests and actively engage in issue-based, flexible economic frameworks (e.g., IPEF supply chain pillar).

By blending internal structural resilience (Atmanirbhar Bharat) with agile, pragmatic bilateral diplomacy, India can effectively transform this deglobalization wave into a strategic economic opportunity.