Global partnerships expand to support local manufacturing industries.
India is rapidly shifting its economic strategy to secure new global markets as exporters face mounting pressure from steep American tariffs. With trade relations between Washington and New Delhi straining under a 50 percent tariff hike introduced by US President Donald Trump last August, the Indian government is aggressively pursuing alternative avenues to safeguard its manufacturing ambitions.
Focus on Europe and Beyond
To counter the uncertainty in the American market, New Delhi has turned its attention toward the European Union. High-level diplomatic engagements are already in motion. German Chancellor Friedrich Merz is scheduled to visit India on Monday to meet Prime Minister Narendra Modi. Their discussions will focus on intensifying cooperation in trade and investment, signaling a deepening bond between the two economies.
Furthermore, European Commission President Ursula von der Leyen is expected to visit later this January. She has previously described the potential India-EU agreement as the "largest deal of this kind," raising hopes for a breakthrough despite missed deadlines in late 2025 regarding steel and auto exports.
Diversifying the Export Basket
The push for India trade deals is not limited to Europe. Negotiations are currently underway with a wide array of partners, including the Eurasian Economic Union, Mexico, Chile, and the South American Mercosur bloc.
According to Ajay Srivastava of the Global Trade Research Initiative (GTRI), 2025 was one of the most active years for Indian trade diplomacy. The goal is to spread risk so the economy is not overly reliant on a single dominant partner. This strategy has already yielded results, with a major pact signed with Britain last year that could potentially double garment exports to the UK over the next three years.
Economic Necessity
Experts argue that diversification is no longer just an option but an imperative. The heavy US tariffs were largely a response to India’s purchase of Russian oil, which Washington claims funds Moscow’s war efforts. While India reduced its Russian oil imports significantly in December, a trade resolution with the US remains elusive.
Sectors such as engineering and apparel, which are labour-intensive, stand to benefit most from these new agreements. Pankaj Chadha, chairman of the Engineering Export Promotion Council, emphasized that while the US remains a lucrative market, it is risky to "put all your eggs in one basket."
By opening doors to the Middle East through a recent deal with Oman and securing investments via a pact with New Zealand, India is demonstrating flexibility and resilience in a volatile global economy.
