Context

• In early 2026, India concluded major agreements with the European Union and the United States.
• The India–EU Free Trade Agreement, described as the mother of all deals, and the U.S. pact, seen as a strategic reset, reflect India’s rising global economic stature.
• Yet these successes also reveal a deeper shift: the global trading system is fragmenting, with politics, not efficiency, increasingly determining outcomes.

The Erosion of Rules-Based Globalisation

• For decades, global trade functioned on comparative advantage, efficiency, and open markets, supported by international institutions that ensured fairness.
• Countries specialised and traded freely, enabling India’s pharmaceutical industry and South Korea’s technological rise.
• Today, this framework is weakening. Access to critical goods such as semiconductors, rare earth minerals, and medical supplies is shaped by geopolitics rather than market logic.
• The decline of rules-based trade has reduced trust and increased uncertainty.

Weaponisation of Economic Interdependence

• Major powers now use trade as a strategic tool. China has restricted exports during disputes, exposing India’s reliance on Active Pharmaceutical Ingredients (APIs).
• This dependence extends to electronics, solar panels, and supply chains, making economic ties vulnerable.
• Similarly, the United States has imposed tariffs to influence policy decisions, demonstrating that even partnerships are conditional.
• Such actions show how economic interdependence has become a mechanism of leverage, not stability. Countries can no longer rely on predictable trade relationships.

Shrinking Strategic Space for India

• India’s traditional strategy of strategic autonomy, balancing relations among major powers, has weakened.
• Russia’s role as a counterweight has declined due to sanctions, reduced technological access, and growing dependence on China.
• This has narrowed India’s policy space. Reliance on either the U.S. or China for critical supply chains carries significant risks.
• While recent agreements provide short-term gains, they do not address long-term vulnerabilities in an increasingly fragmented system.

The Case for Sectoral Plurilateralism

• A shift toward sectoral plurilateralism offers a viable alternative.
• This approach involves forming focused partnerships among select countries in specific sectors rather than relying on large, broad alliances.
• Such arrangements enable countries to develop shared standards, build capabilities, and create mutual interdependence on balanced terms.
• Historical precedent supports this model. The 1951 European Coal and Steel Community linked industries among six nations, reducing conflict and building trust through practical cooperation.
• This eventually evolved into the European Union. The lesson is clear: functional cooperation can precede deeper integration.

Leveraging India’s Strengths

• India possesses significant assets that can underpin such partnerships. Its digital public infrastructure, including UPI, Aadhaar, and DigiLocker, demonstrates scalable innovation.
• Collaborative efforts to build open-source systems could provide alternatives to China’s surveillance model and U.S. big tech dominance.
• In artificial intelligence (AI), opportunities for collaboration are substantial. The United States leads in foundation models, while China builds parallel systems.
• However, countries like France, Japan, and the UAE offer strengths in research, manufacturing, and investment capital.
• Combined with India’s engineering talent and large market, these partnerships could create competitive and inclusive AI ecosystems for emerging economies.
• Establishing early technical standards would ensure long-term influence.

From Tactical Wins to Strategic Vision

• Bilateral agreements are tactical wins, but they remain vulnerable to political shifts. A broader strategy requires building durable systems of cooperation.
• Sector-specific partnerships in areas such as space, digital infrastructure, and AI can provide this foundation.
• These collaborations must have the authority to set binding standards and regulate participation, ensuring stability and credibility.
• Such partnerships transform national capabilities into sustained influence rather than temporary bargaining tools.
• They also reduce dependence on dominant powers while enhancing resilience.

Conclusion

• The global trade environment is undergoing a structural transformation marked by fragmentation, uncertainty, and rising geopolitical competition.
• India’s recent trade agreements highlight both opportunity and vulnerability. To navigate this landscape, India must move beyond reactive diplomacy.
• By embracing sectoral plurilateralism, India can strengthen its position, mitigate risks, and shape emerging global systems.
• Building partnerships with middle powers enables it to participate in defining rules rather than merely adapting to them.
• This shift, from managing relationships to creating frameworks, will determine India’s role in the evolving world order.