External risks from trade barriers remain, trade deal with US could boost exports, says Finance Ministry review

Trade Barriers and Global Headwinds

The Finance Ministry highlighted that the imposition of trade barriers by several countries—especially in the form of anti-dumping duties and import restrictions—has created an uncertain environment for exporters. Additionally, slower global growth and disruptions in global supply chains due to conflicts and climate events have further dampened export momentum.

“In recent quarters, external risks emanating from protectionist policies in key markets have posed challenges to India’s export performance,” the review noted. “The global trade landscape remains fragile, warranting strategic partnerships and trade diplomacy.”

Promise of a US Trade Deal

Against this backdrop, the ministry pointed to ongoing trade negotiations with the United States as a promising development. A successful deal could enhance market access for Indian goods and services, reduce tariff barriers, and encourage investment flows between the two countries.

“An India-US trade agreement, if finalized, could serve as a catalyst for higher exports, particularly in labor-intensive sectors like apparel, gems and jewellery, and certain agriculture products,” the review stated.

Such a deal would also support the government’s larger goals under the “Make in India” and “Atmanirbhar Bharat” (self-reliant India) initiatives, by providing a platform to integrate more deeply into global value chains.

Sectoral Opportunities

The Finance Ministry identified information technology (IT), pharmaceuticals, and renewable energy as sectors with high potential to benefit from stronger bilateral trade ties with the US. IT services, in particular, already enjoy a strong presence in the US market and could see further gains with better mobility and visa frameworks.

In manufacturing, easing of US tariffs on Indian goods could revive interest among exporters hit hard by previous trade disputes and tariff hikes during earlier administrations.

Government’s Trade Strategy

To mitigate global trade risks, the government has been actively pursuing bilateral and multilateral trade agreements. Recent trade deals with the UAE and Australia have shown positive results, and similar outcomes are expected if talks with the UK and EU progress smoothly.

In parallel, the ministry is working closely with industry stakeholders to enhance export competitiveness through policy support, logistics upgrades, and digital trade facilitation.

Outlook

While the short-term trade outlook remains cautious due to global uncertainties, the Finance Ministry remains optimistic about India’s medium-term export trajectory. The anticipated recovery in global demand, coupled with strategic trade agreements, could help offset the impact of existing trade barriers.

“In the face of global headwinds, diversifying export destinations and strengthening trade partnerships are critical,” the review concluded. “The ongoing dialogue with the United States is a step in this direction and holds considerable promise.”