Competing on equal phrases: How commerce agreements can reshape India’s progress mannequin
International commerce at the moment is very aggressive. International locations that mix decrease manufacturing prices with preferential tariff entry seize provide chains shortly. Even small tariff variations can regularly shift sourcing selections. If a competing manufacturing hub presents related high quality at decrease price and enjoys higher tariff entry, world consumers will transfer. India’s industrial and providers capabilities are globally aggressive; what more and more determines success is whether or not exporters compete on equal phrases.
India’s strategy to commerce partnerships is present process a delicate however necessary evolution. The nation is not negotiating commerce agreements from a place of vulnerability, however from a place of functionality. Latest engagements with main financial blocs, together with the USA, the UK and the European Union, mirror this shift. Preferential entry to giant consumption markets comparable to Europe strengthens export visibility and industrial scale.
Improved tariff alignment with the USA enhances competitiveness in sectors instantly linked to world manufacturing realignment. Collectively, these agreements are regularly repositioning India from being primarily a consumption-led financial system to changing into an more and more necessary participant in world manufacturing networks.
Securing aggressive entry
The India-EU commerce settlement brings India into deeper financial engagement with a bloc that features main industrial powerhouses comparable to Germany, France, Italy, Spain and the Netherlands and considerably expands India’s world commerce integration by offering preferential market entry for many exports. Provided that India and the EU collectively account for roughly 25% of worldwide GDP and a 3rd of world commerce flows, the pact marks a structural milestone in India’s journey towards export competitiveness and deeper world capital alignment.
Improved tariff parity can drive tangible outcomes:
- Increased export volumes in labour-intensive sectors
- Larger participation within the US friend-shoring provide chains
- Elevated manufacturing scale and employment
India’s tariff place is now broadly corresponding to that of different main exporting economies supplying the US. In labour-intensive sectors comparable to textiles and leather-based, the place even marginal price variations matter, the sooner tariff drawback has narrowed considerably. In world commerce, sourcing selections are sometimes made on slim margins. India is now firmly on equal footing, competing on functionality reasonably than tariff differential.
Markets desire visibility
Latest tariff readability coincided with renewed FII inflows of roughly USD 1.7 billion, highlighting how commerce visibility influences capital allocation selections. Stronger export momentum is more and more shaping earnings high quality and market valuations.
Export-oriented companies usually exhibit higher earnings visibility and pure foreign money assist in periods of rupee weak spot. Export-heavy sectors comparable to IT and prescription drugs mirror this pattern, with Nifty IT buying and selling at 24-25x P/E and Nifty Pharma at c.30x, in contrast with discounted valuations in commodity cyclicals.
Few sectors illustrate India’s export transformation extra clearly than electronics manufacturing. Not too way back, India was largely a consumption marketplace for world electronics manufacturers. Right this moment, it’s rising as a serious manufacturing hub. Electronics exports have climbed to USD 48.2 billion in 2025, transferring from seventh to 3rd amongst India’s export classes. But India’s export-to-GDP ratio stays c.21%, nicely under a number of Asian manufacturing economies – highlighting the dimensions of alternative forward.
Over the previous 12 months, FPI flows into Indian equities have turned unstable. After robust inflows by 2023-24, India noticed web FPI outflows of almost USD 17-18 billion in 2025 as world liquidity tightened and US yields moved increased. Even in early 2026, flows have remained uneven, with temporary influx spurts adopted by profit-taking.
For an financial system managing a present account deficit pushed by oil and electronics imports, robust export progress reduces dependence on unpredictable capital flows. It strengthens overseas trade reserves, helps foreign money stability and enhances macro credibility. For traders, that stability issues. That is one motive export-oriented sectors comparable to IT providers and prescription drugs have traditionally commanded premium valuations relative to purely home cyclicals.
A transparent strategic shift
If India intends to maintain excessive progress whereas managing exterior stability, commerce integration shall be necessary. India is regularly transferring from protection-led warning to competitiveness-led integration. At a time when world provide chains are being redefined, this shift is well timed.
Commerce agreements do three necessary issues: First, they enhance export competitiveness and defend market share. Second, they strengthen overseas trade administration by increasing steady earnings. Third, they improve India’s attractiveness as a world manufacturing and providers associate.
These agreements mirror India’s aspiration to steer, to compete, and to be counted among the many world’s most open, dynamic, and forward-looking economies. The message is evident: the world is opening its markets to India. It is time for us to step ahead and lead from the entrance.
(The writer Neerja Ajit, is Vice President at NovaaOne)
(Disclaimer: Suggestions, strategies, views, and opinions given by consultants are their very own. These don’t characterize the views of The Financial Instances.)
