International commerce at the moment is very aggressive. Nations that mix decrease manufacturing prices with preferential tariff entry seize provide chains rapidly. Even small tariff variations can regularly shift sourcing selections. If a competing manufacturing hub provides related high quality at decrease value and enjoys higher tariff entry, international patrons 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 method to commerce partnerships is present process a delicate however necessary evolution. The nation is now not negotiating commerce agreements from a place of vulnerability, however from a place of functionality. Latest engagements with main financial blocs, together with the US, the UK and the European Union, replicate this shift. Preferential entry to giant consumption markets equivalent to Europe strengthens export visibility and industrial scale.
Improved tariff alignment with the US enhances competitiveness in sectors immediately linked to international manufacturing realignment. Collectively, these agreements are regularly repositioning India from being primarily a consumption-led economic system to changing into an more and more necessary participant in international manufacturing networks.
Securing aggressive entry
The India-EU commerce settlement brings India into deeper financial engagement with a bloc that features main industrial powerhouses equivalent to Germany, France, Italy, Spain and the Netherlands and considerably expands India’s international 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 international 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 similar to that of different main exporting economies supplying the US. In labour-intensive sectors equivalent to textiles and leather-based, the place even marginal value variations matter, the sooner tariff drawback has narrowed considerably. In international commerce, sourcing selections are sometimes made on slender margins. India is now firmly on equal footing, competing on functionality somewhat than tariff differential.
Markets favor 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 sometimes reveal higher earnings visibility and pure forex assist in periods of rupee weak spot. Export-heavy sectors equivalent to IT and prescribed drugs replicate this development, 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 international electronics manufacturers. At this time, it’s rising as a significant 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%, properly 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 risky. After sturdy inflows by 2023-24, India noticed internet FPI outflows of practically USD 17-18 billion in 2025 as international liquidity tightened and US yields moved increased. Even in early 2026, flows have remained uneven, with transient influx spurts adopted by profit-taking.
For an economic system managing a present account deficit pushed by oil and electronics imports, sturdy export progress reduces dependence on unpredictable capital flows. It strengthens international change reserves, helps forex stability and enhances macro credibility. For buyers, that stability issues. That is one cause export-oriented sectors equivalent to IT providers and prescribed 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 international 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 international change administration by increasing secure earnings. Third, they improve India’s attractiveness as a worldwide manufacturing and providers companion.
These agreements replicate 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 Occasions.)
