I’ll be impressed when he comes through on the farm laws reform.
ProbablySatan420 on
India this week signed the latest in what’s been a run of rapid-fire free trade agreements. The deal, with New Zealand, is far from the South Asian country’s largest, but like others over the past year it marked a swift conclusion to what had been a drawn-out process.
Negotiations between Asia’s No. 3 economy and the Australasian nation began in 2010, but spent much of the past decade in cold storage. The agreement comes on the heels of India’s “mother of all deals” with the European Union, which ended two decades of stop-start talks. Last July, New Delhi sealed a free-trade deal with the UK, and negotiations continue on finalizing an interim pact with the US.
This all amounts to a striking reversal of Prime Minister Narendra Modi’s earlier turn toward protectionism, and a resumption of what had been a long-term trend of declining tariffs. Part of the impetus for this turnabout is pressure generated by President Donald Trump’s protectionist moves and a broader unraveling of the US-India relationship. The new reality of geopolitical uncertainty makes securing new markets and partnerships more urgent.
But the shift also reflects a deeper realization for India: There is no durable alternative to export-led growth. Modi’s original protectionist pivot rested on prioritizing domestic demand and economic self-reliance over exports. He set out to build national champions in strategic, technology-intensive sectors through a mix of protection, production incentives and regulatory support.
The bet was that higher trade barriers also would lure global firms to relocate production to India. That template now is being cast aside.
Between 2017 and 2020, India’s average tariff rate rose from roughly 13% to roughly 18%. Modi’s protectionist tilt included an increase in quality control orders (QCOs), which effectively served as non-tariff barriers aimed at low-cost imports, primarily from China.
The idea was that India’s producers could supply the nation’s own consumer market. But India’s domestic demand, although large in absolute terms, isn’t deep enough to sustain the high growth needed to match the ambition of achieving developed-nation status by 2047. The approach shielded large Indian conglomerates from foreign competition, but also reduced their capacity to become globally competitive.
The numbers tell the story: Manufacturing’s share of India GDP has slipped from 16% to 13% in the last decade and job creation remains Modi’s Achilles heel. High tariffs also hurt India’s exports, which are import intensive — in other words, they depend on intermediate items made elsewhere. The burden of protection fell disproportionately on small and medium-sized firms, which are responsible for the majority of job creation.
India’s Non-Tariff Barriers Surged After 2019
Source: CSEP, NITI Aayog Note: 2025 data do not reflect QCOs withdrawn in November
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I’ll be impressed when he comes through on the farm laws reform.
India this week signed the latest in what’s been a run of rapid-fire free trade agreements. The deal, with New Zealand, is far from the South Asian country’s largest, but like others over the past year it marked a swift conclusion to what had been a drawn-out process.
Negotiations between Asia’s No. 3 economy and the Australasian nation began in 2010, but spent much of the past decade in cold storage. The agreement comes on the heels of India’s “mother of all deals” with the European Union, which ended two decades of stop-start talks. Last July, New Delhi sealed a free-trade deal with the UK, and negotiations continue on finalizing an interim pact with the US.
This all amounts to a striking reversal of Prime Minister Narendra Modi’s earlier turn toward protectionism, and a resumption of what had been a long-term trend of declining tariffs. Part of the impetus for this turnabout is pressure generated by President Donald Trump’s protectionist moves and a broader unraveling of the US-India relationship. The new reality of geopolitical uncertainty makes securing new markets and partnerships more urgent.
But the shift also reflects a deeper realization for India: There is no durable alternative to export-led growth. Modi’s original protectionist pivot rested on prioritizing domestic demand and economic self-reliance over exports. He set out to build national champions in strategic, technology-intensive sectors through a mix of protection, production incentives and regulatory support.
The bet was that higher trade barriers also would lure global firms to relocate production to India. That template now is being cast aside.
Between 2017 and 2020, India’s average tariff rate rose from roughly 13% to roughly 18%. Modi’s protectionist tilt included an increase in quality control orders (QCOs), which effectively served as non-tariff barriers aimed at low-cost imports, primarily from China.
The idea was that India’s producers could supply the nation’s own consumer market. But India’s domestic demand, although large in absolute terms, isn’t deep enough to sustain the high growth needed to match the ambition of achieving developed-nation status by 2047. The approach shielded large Indian conglomerates from foreign competition, but also reduced their capacity to become globally competitive.
The numbers tell the story: Manufacturing’s share of India GDP has slipped from 16% to 13% in the last decade and job creation remains Modi’s Achilles heel. High tariffs also hurt India’s exports, which are import intensive — in other words, they depend on intermediate items made elsewhere. The burden of protection fell disproportionately on small and medium-sized firms, which are responsible for the majority of job creation.
India’s Non-Tariff Barriers Surged After 2019
Source: CSEP, NITI Aayog Note: 2025 data do not reflect QCOs withdrawn in November
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