Revision summary
The world is shifting from a single WTO bargain toward tariffs, subsidies, friend-shoring and carbon border taxes. India’s risks are weaker Western demand, costly Chinese intermediates, technology denial and rupee shocks. Goods exports in textiles, engineering and chemicals are exposed. Responses include wider FTAs, PLI with quality, destination diversification, forex buffers and a defence of WTO rules. A large domestic market is India’s shock absorber, not a reason to close the border entirely.
Model answer
Introduction
The 1990s taught India to live with open trade and one WTO rule book. The 2020s are teaching a harsher lesson. Large countries now use tariffs, industrial subsidies and security screens. Multilateralism is not dead, but it is no longer the default. India has to grow in that weather.
Body
The world that is arriving
The WTO’s appellate body has been paralysed for years. The United States has returned to broad tariffs and to export controls on chips and tools. The European Union’s Carbon Border Adjustment Mechanism will tax carbon-heavy imports such as steel. Firms friend-shore to political partners. Bilateral and minilateral deals (IPEF, scattered FTAs) replace a single Doha round. War and Red Sea disruption add freight risk. This is protectionism with a security accent, not the 1930s in every detail, but it is not 2005 either.
Challenges for India
India’s goods exports still need US and EU demand. A tariff wall there hits textiles, gems, engineering and chemicals. India also imports Chinese intermediates, so a broken China chain raises costs even when Delhi wants to sell a finished phone. Technology denial can slow semiconductors and machine tools. Oil remains a bill; a fragmented energy market is volatile. A strong dollar bout can pressure the rupee and imported inflation. At home, logistics and quality still lose some orders to Vietnam or Mexico, who are the other “plus one” factories.
How to meet them
Diversify export destinations toward the Gulf, Africa, ASEAN and Latin America, not only the West. Finish FTAs that actually open markets (and read the fine print on agriculture and data). Use PLI and quality control orders to deepen domestic value, while not trapping firms in a high-cost island. Stay in the WTO and fight for a working dispute system, because a world of only power tariffs will hurt India more than a rule-bound one. Keep forex reserves — already in the six-hundred-billion-dollar zone in recent years — as a shock pad. Use domestic demand, which is India’s real scale, so that a foreign tariff is not a full recession.
The challenge is to be open enough to learn and sell, and armed enough not to be a dumping ground.
Flow diagram
flowchart TD W[WTO strain] --> T[Tariffs CBAM controls] T --> X[Indian export shock] R[FTAs PLI diversification] --> X D[Domestic demand forex] --> X
Conclusion
Protectionism and bilateral deals raise tariffs, carbon taxes and tech walls against Indian exports. India can answer with wider markets, deeper manufacturing, a still-alive WTO voice, and a large home demand, not with a fantasy of full autarky.
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Do FTAs replace the WTO?
They patch markets. They cannot replace a global rule on subsidies and dumping that smaller countries can invoke.
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