FTAs as Geopolitical Instruments India's Strategic Autonomy in a Multipolar Trade World

In an era where trade agreements have transcended their traditional commercial boundaries to become potent instruments of geopolitical strategy, India's approach to Free Trade Agreements (FTAs) reflects a sophisticated reimagining of its historic non-alignment doctrine. As the world's fastest-growing major economy, according to the International Monetary Fund's October 2025 projections showing 6.6 percent growth in 2025, India navigates turbulent waters of great power competition, supply chain fragmentation, and trade protectionism. New Delhi has transformed FTAs from mere tariff-reduction mechanisms into vital tools for preserving strategic autonomy, signaling geopolitical intent, and hedging against an increasingly polarized global order.

India's explicit rejection of conditional trade terms that would compromise its relationships with third countries underscores a fundamental principle driving its contemporary foreign policy. This principled stance distinguishes India's multi-alignment strategy from the rigid bloc politics of the past, positioning FTAs not as exclusive commitments but as flexible instruments that maximize national advantage while preserving decision-making independence.

Navigating Contradictory Pressures

India's pursuit of strategic autonomy through FTAs confronts formidable challenges rooted in the irreconcilable demands of competing great powers and structural vulnerabilities of its economic integration model. The complexities become evident when examining India's current trade relationships with major partners:

India's Major Trading Partners (FY 2024-25)

Source: Ministry of Commerce and Industry, Government of India

The United States relationship encapsulates contradictions most acutely. According to the Ministry of Commerce and Industry, the United States accounts for 19.1 percent of India's exports in FY25, making it India's largest export destination with total bilateral goods trade valued at $131.84 billion. However, as per KPMG's report, the Trump administration imposed a 26 percent reciprocal tariff on Indian goods—among the highest applied to any trading partner. These tariff demands accompany pressures including agricultural market access concessions, elimination of restrictions on dairy products derived from animals fed with genetically modified organisms, relaxation of pharmaceutical patent protections, and reduced Russian oil imports.

The "China factor" presents equally complex challenges visible in the staggering $99.2 billion trade deficit—a record gap according to the Global Trade Research Initiative. This structural imbalance reflects deeper dependencies:

India's Pharmaceutical Dependency on China

Source: Pharmaceutical Exports Promotion Council

According to the Pharmaceutical Exports Promotion Council data for 2023-24, China accounted for 43.45 percent of India's pharmaceutical imports, amounting to $3.6 billion, with India's dependence on Chinese Active Pharmaceutical Ingredients and Key Starting Materials at 60-70 percent for many critical drugs. This creates strategic vulnerability in a sector where India aspires for global leadership.

The Russian oil dilemma exposes limits of multi-alignment when subjected to unilateral pressure. Russia supplies approximately one-third of India's crude oil imports, totaling 1.75 million barrels per day in 2025, purchased at significant discounts. US sanctions on Rosneft and Lukoil in October 2025, which supply over 60 percent of India's Russian crude imports, created acute pressure for diversification while threatening secondary sanctions.

Establishing Asymmetric Integration Frameworks With Differentiated Commitments

India must architect a new generation of FTA structures that embed "variable geometry" principles—allowing different levels of integration across different domains within the same agreement. Rather than pursuing uniform liberalization across all sectors simultaneously, India should negotiate modular FTAs with "core commitments" (tariff reductions in non-sensitive goods, services liberalization in competitive sectors) and "conditional commitments" (deeper integration in specific sectors contingent on technology transfer, investment commitments, or IP cooperation).

The India-EFTA Trade and Economic Partnership Agreement, which came into force on October 1, 2025, provides the foundational template. TEPA secured an unprecedented $100 billion investment commitment over 15 years with obligations to create one million direct jobs—the first binding investment pledge in any Indian FTA.

Comparative Analysis of India's Key FTAs

Source: Ministry of Commerce and Industry, Press Information Bureau

According to the Ministry of Commerce, EFTA liberalized 92.2 percent of tariff lines covering 99.6 percent of India's exports, while India offered concessions on 82.7 percent of tariff lines representing 95.3 percent of EFTA exports, with strategic carve-outs protecting dairy, soya, coal, and pharmaceuticals. Critically, over 80 percent of EFTA imports to India comprise gold, where no effective duty change was made.

This asymmetric integration model should be scaled globally with explicit "strategic autonomy preservation clauses" in all future FTAs. These clauses must guarantee India's sovereign right to maintain diverse energy partnerships (including with Russia), implement trade remedies without partner approval, protect food security through agricultural restrictions, and reject any conditionalities linking trade benefits to third-country relationships.

Creating Geo-Economic Hedging Through "Strategic Trade Triangulation"

India must systematically construct triangular trade architectures that counterbalance dependencies through deliberate geographic diversification. The objective is ensuring that for every critical import dependency on one power bloc, India cultivates alternative supply relationships with competing blocs, creating mutual dependencies that deter economic coercion.

For energy security, India should formalize the emerging diversification visible in October 2025 data. According to KPMG, India's major energy imports in 10MFY25 included mineral fuels and mineral oils from both the US (6.4 percent of total imports) and Russia (one-third of crude imports). India must accelerate FTA negotiations with Arab Gulf nations—particularly Oman and expansion of the UAE Comprehensive Economic Partnership Agreement—to create contractual guarantees for 40 percent of oil imports from GCC countries, 30 percent from the Americas (US, Canada, Brazil, Guyana), and 30 percent from Russia and Central Asia by 2030. This prevents any single supplier from exercising monopolistic pressure while maintaining strategic partnerships across all camps.

For pharmaceutical APIs, where according to Pharmexcil data India imports $3.6 billion annually from China representing 43.45 percent of pharmaceutical imports in 2023-24, India needs triangulated sourcing. The Production Linked Incentive scheme launched in February 2021 with Rs. 15,000 crore outlay for 2020-2029 has catalyzed Rs. 3,586 crore in investments by December 2023, producing cumulative sales of Rs. 844 crore in domestically manufactured bulk drugs, according to government data.

India should negotiate dedicated pharmaceutical cooperation chapters in the India-EU FTA (currently in 11th round of negotiations) and with ASEAN partners, securing commitments for European and Southeast Asian companies to establish API manufacturing facilities in India's three Bulk Drug Parks (Gujarat, Andhra Pradesh, Himachal Pradesh) in exchange for guaranteed preferential procurement for 15-year periods. This creates Chinese-European-Indian triangulation where no single source controls more than 40 percent of critical API supply.

Institutionalizing "Sectoral Champions Strategy" Through FTA-PLI Integration

India must strategically integrate its FTA negotiations with the Production Linked Incentive architecture to create globally competitive manufacturing ecosystems in targeted sectors. Understanding current sectoral performance is critical:

India's Top Export Sectors (FY 2024-25)

Source: Ministry of Commerce and Industry

Rather than defensive protectionism or across-the-board liberalization, this approach combines: (a) 7-10 year phase-in periods for tariff reductions in PLI sectors, (b) negotiated investment commitments from FTA partners in PLI-designated sectors, (c) technology transfer requirements embedded in market access commitments, and (d) preferential procurement provisions that guarantee market access for PLI-supported production.

The electronics and semiconductors sector illustrates the opportunity. According to KPMG analysis, electrical machinery and equipment comprised 3.1 percent of India's total exports in 10MFY25, with 16.1 percent destined for the US market. India's 26 percent US tariff compares favorably against China's 54 percent and Vietnam's 46 percent tariffs. India should leverage this comparative advantage by negotiating "semiconductor cooperation protocols" within the India-US bilateral trade agreement and India-EU FTA.

These protocols should mandate: (1) US and European semiconductor firms establishing packaging, assembly, and testing facilities in India within 3 years of FTA implementation, (2) technology licensing for 28nm and 16nm chip fabrication to Indian partners, (3) India's commitment to zero tariffs on advanced semiconductor manufacturing equipment from partner countries, (4) joint R&D investment funds of $5 billion over 10 years with IP co-ownership, and (5) guaranteed market access for Indian-manufactured chips in US and EU public procurement for defense and critical infrastructure.

Deploying "Conditional MFN" Clauses to Maximize Leverage Across Simultaneous Negotiations

India currently conducts parallel FTA negotiations with the US, EU, UK (concluded), EFTA (concluded), ASEAN (review), Oman, and explores agreements with MERCOSUR, Chile, Mexico, and Peru. This simultaneity creates unprecedented leverage if managed strategically through "conditional Most-Favored-Nation" clauses that automatically extend better terms secured in one negotiation to other partners who meet specified conditions.

Specifically, India should insert standardized clauses in all ongoing negotiations stating: "Any tariff concession, market access provision, or regulatory cooperation commitment offered by India in future FTAs will be automatically extended to [Partner Country] within 12 months, provided [Partner Country] reciprocates with equivalent concessions in sectors identified as priority by India." This creates competitive pressure among India's negotiating partners to offer better terms, knowing that any superior deal India strikes elsewhere will be extended to competitors.

For instance, in India-US negotiations, India could commit: "Should India secure more favorable intellectual property flexibilities, data localization permissions, or agricultural protection provisions in its India-EU FTA, these will be automatically extended to the US within one year, provided the US reciprocates by reducing pharmaceutical patent term extensions and accepting India's food safety standards without modification." This prevents the US from demanding maximalist positions while encouraging it to offer competitive terms knowing India has alternatives.

Building "Supply Chain Security Consortia" Through Plurilateral Frameworks

Rather than bilateral vulnerability, India should construct multilateral frameworks that pool supply chain resilience. India should propose a "Quad Plus Supply Chain Security Agreement" expanding beyond India, US, Japan, and Australia to include ASEAN nations, South Korea, and UAE. This agreement would establish: (1) Joint strategic reserves of critical materials (semiconductors, rare earths, APIs, lithium) with storage facilities in each member nation and guaranteed access during emergencies, (2) Coordinated investment in alternative supply sources with joint financing mechanisms, (3) Common standards for supply chain mapping and risk assessment using blockchain-based tracking systems, (4) Mutual recognition of quality certifications reducing redundant testing, and (5) Technology sharing protocols for critical manufacturing processes.

IMF Growth Projections - India vs Major Economies (October 2025)

Source: International Monetary Fund, October 2025

According to the IMF's October 2025 Regional Economic Outlook for Asia, "Asia will remain the biggest driver of global growth, contributing about 60 percent this year and next" despite tariffs and uncertainty. India contributing 18 percent of global growth according to the World Economic Forum's September 2025 analysis must leverage this position to anchor supply chain consortia that reduce collective vulnerability to any single supplier.

For pharmaceuticals specifically, India should establish an "Indo-Pacific Pharmaceutical Security Consortium" with Japan, South Korea, Australia, and ASEAN nations, committing each member to manufacture designated APIs domestically (India: antibiotics and vitamins; Japan: high-tech cancer drugs; South Korea: biologics; Australia: vaccines; ASEAN: tropical disease treatments) with guaranteed cross-supply arrangements and joint R&D investments in fermentation technology and process chemistry.

Instituting "Trade Agreement Performance Bonds" to Ensure Implementation Accountability

A persistent challenge in India's FTA experience has been asymmetric implementation—partners securing market access in India while delaying reciprocal commitments through non-tariff barriers, slow regulatory approvals, or restrictive standards. The India-ASEAN FTA experience, where India faced $79.67 billion imports against $41.2 billion exports in 2023-24 according to government data, exemplifies this asymmetry.

India should pioneer "Trade Agreement Performance Bonds" in all new FTAs—financial mechanisms where both parties deposit securities (proportional to projected trade benefits) in escrow accounts managed by neutral institutions like the World Bank or Asian Development Bank. These bonds are released annually based on verified achievement of balanced implementation metrics: (a) ratio of exports to imports remaining within agreed bands, (b) processing times for regulatory approvals meeting specified benchmarks, (c) number of disputes raised and resolved within stipulated timelines, and (d) investment flows in both directions meeting minimum thresholds.

For the India-EU FTA currently under negotiation with bilateral trade worth $136.53 billion in 2024-25 according to government data, India should propose mutual performance bonds of €1 billion each, released in annual tranches of €100 million contingent on verified achievement of: (1) EU processing of Indian sanitary and phytosanitary certifications within 30 days, (2) India providing business visa approvals for EU professionals within 15 days, (3) bilateral investment flows remaining within 30 percent variance of projections, and (4) dispute resolution proceedings concluding within 180 days.

This transforms FTAs from aspirational documents into binding contracts with financial enforcement mechanisms, ensuring that all parties implement commitments in good faith or face concrete financial consequences.

Issue-Based Alignment as Modern Non-Alignment

India's FTA strategy represents the operationalization of "strategic autonomy" in an age of supply chain weaponization and great power competition. By rejecting exclusive alignments while building diverse partnerships, India architects what can be termed "issue-based alignment"—a modern incarnation of non-alignment responding to 21st-century realities.

The International Monetary Fund's October 2025 projection of 6.6 percent growth for India in 2025 (slowing to 6.2 percent in 2026) compared to China's 4.8 percent in 2025 (and 4.2 percent in 2026), validates the resilience of India's multi-alignment model despite facing significant tariff headwinds. The IMF noted that India's growth carryover from a robust first quarter "more than compensated for the increase in the U.S. effective tariff rate," demonstrating that diversified partnerships and robust domestic demand can cushion external shocks.

As India negotiates through the multipolar trade world, FTAs serve not as ends in themselves but as instruments for a larger geopolitical vision: an international order where middle powers retain autonomy, where development space is protected, where trade rules serve public health and food security alongside commerce, and where no single power can impose conditionalities that compromise fundamental national interests. India's success will determine not just its own trajectory toward becoming the world's third-largest economy, but will establish templates for how rising powers navigate fraught terrain between great power blocs while preserving principles of sovereign equality and mutual respect that underpin a rules-based international order.

Authored by Rohit Kumar Singh, Ph.D. (Eco), PMP®.