Global trade is undergoing significant adjustment — driven by geopolitical realignments, evolving supply chains and changing economic priorities. Amidst all this, India has been steadily rising to the occasion, not only as a large domestic market but as a serious player in global trade.

To address internal challenges and adapt to changes in the external environment, India has been implementing a series of broad policy changes that are shaping the course of its economy for the coming decades. Trade reforms under the Make in India 2.0 initiative aim to strengthen 27 different sectors  and position the country as a reliable global exporter.

A primary focus of this effort is attracting long-term foreign investment and promoting the “Make in India” movement. The government is promoting regulatory reforms, offering targeted incentives and renewing free trade agreements (FTAs) to strengthen the country's stature as a prime destination for global investments, growth and stability. 

India's trade policies in 2025

India revamped its Foreign Trade Policy (FTP) in 2023 with an aim to increase its exports to $2 trillion by 2030.  A dynamic and open-ended policy, the FTP creates a framework that supports ease of doing business (EoDB), reduces procedural bottlenecks, facilitates digitalisation in trade and boosts competitiveness of Indian firms. The goal is to build a flexible and responsive structure that can be adjusted without waiting for fixed policy cycles.

In line with this trade policy, the 2025 Union Budget  introduced new measures shifting from a largely defensive trade posture to a more active, forward-looking approach to position India as a global production and sourcing base.

The National Manufacturing Mission: India's new growth engine

As per IMF projections, India is expected to grow at 6.3% in 2026,  with a significant portion expected to be driven by the manufacturing sector. As the global economy seeks a stable and reliable manufacturing hub, India is well-positioned to meet this demand. It is also increasingly being seen as a preferred destination in the global 'China+1' diversification strategy. Supporting this vision, the government announced the National Manufacturing Mission under the broader ambit of the 'Make in India 2.0' programme.

Building upon the regulatory framework set by FTP 2023, the Mission aims to harness advanced technologies to strengthen India's dynamic Micro, Small, and Medium Enterprises (MSME) sector and improve EoDB for international stakeholders. 

The Mission targets a wide range of sectors, including:

• Electronics & Semiconductors: Supported through the PLI scheme, India is building fabs, chip packaging facilities, and design clusters to reduce import dependence and capture global demand.
• Pharmaceuticals & Medical Devices: India's strength in generics is now being expanded to biosimilars and high-end medical technologies, supported by dedicated bulk drug and med-tech parks.
• Textiles & Technical Textiles: Beyond cotton and apparel, the government is promoting man-made fibre and geotextiles production to tap into global demand.
• Automotive & EVs: With policy support for EV manufacturing and battery supply chains, India is positioning itself as a global EV hub.
• Renewable Energy Equipment: Sectors like solar PV, green hydrogen, and wind components are receiving policy and tariff support under India's green manufacturing push.

While the broader mission spans multiple high-value sectors, specific schemes also focus on traditionally labour-intensive industries such as leather and toys. The initiative aims to enhance the productivity, quality and competitiveness of Indian leather manufacturers. It is expected to generate a turnover of ₹4 lakh crore and exports of over ₹1.1 lakh crore  and create employment for 22 lakh persons.

Through the National Action Plan for Toys, the government is developing sector-specific clusters, strengthening local skill development and building a resilient manufacturing ecosystem and promoting sustainable, innovation-driven toy production that reflect the 'Made in India' ethos.

The rise of India as an FDI destination

India is working to liberalise its industries and has shown noteworthy progress in sectors such as petroleum, agrochemicals, semiconductors and precious stones. Between April and September 2024, India attracted a record $42.1 billion in foreign direct investment (FDI). 

The government is working diligently to enhance the regulatory framework to attract more foreign investments. In 2025, the Ministry of Finance introduced key measures in the Union Budget to support this agenda. These include:

• Increasing the automatic route for FDI to 100% in various sectors, except the strategic ones 
• Raising the sectoral cap from 49% to 74% in sectors  such as defence and insurance 
• Launching the Investment Friendliness Index of States and BRAP rankings 

The government is evaluating enhancements to the Jan Vishwas (Trust-based Governance) Bill, 2023 which modernised the regulatory framework by decriminalising over 183 minor offences across 19 central and state departments  to simplify bureaucratic procedures related to business investments.

A new era of Free Trade Agreements (FTAs)

India is proactively pursuing strategic Free Trade Agreements (FTAs)  and favourable trade deals to support an export-oriented economy and supply essential goods to the global market.

India has signed 13 regional and free trade agreements  in the last five years to enhance its exports. Most of these agreements are with key strategic and economic partners such as the United Arab Emirates (CEPA, 2022),  Australia (ECTA, 2022),  and members of the ASEAN  region. The latest addition to this list is the India-UK FTA, which has been in the works for over three years. On July 24, 2025, India and the UK signed the Comprehensive Economic and Trade Agreement (CETA), which grants India duty-free access on 99% of its export tariff lines (HS codes) to the UK, covering almost the entire trade basket. Key Indian sectors set to benefit include textiles and apparel (over 1,100 product lines), agriculture and processed foods, marine products, chemicals, engineering goods, gems and jewellery, and footwear. On the services side, the FTA secures easier market access for Indian IT, financial, legal, educational, and professional services, with enhanced mobility for Indian professionals—including smooth visa and work permit provisions.

India is actively negotiating new trade agreements with the United States, New Zealand, and the European Union. Securing a favourable tariff arrangement with the United States and establishing more open trade frameworks with the EU are the topmost priorities for the Ministry of External Affairs. 

According to current projections, the India–EU negotiations are expected to conclude by the end of 2025, with a primary focus on concessions for agriculture, information technology and the automobile sector.  Meanwhile, India and New Zealand have commenced negotiations for a bilateral free trade agreement, which officially began on March 16, 2025. 

Tariff rationalisation efforts to boost manufacturing

To boost domestic manufacturing and reduce input costs for industry, the Indian government introduced sweeping tariff reforms through the Finance Bill 2025. This initiative aligns with the broader objective of enhancing the EoDB within India's economy and securing better trade deals with partners.

The Bill has successfully removed over seven customs tariff rates  to lower input costs for investors while exempting customs duties for 35 goods used in EV manufacturing and 28 goods for mobile manufacturing - a move aimed at enhancing India's cost competitiveness in two of the fastest-growing tech sectors.  As an initial step towards broader tariff reduction, the government has reduced import duties on premium motorcycles by 5–10% for Completely Built Units (CBUs), Semi Knocked Down (SKD) units and Completely Knocked Down (CKD) units.   Additionally, the government streamlined tariff structures by removing seven outdated customs duty rates, simplifying compliance for both importers and exporters.

Another effort to make India more welcoming for export-focused manufacturers is the launch of the Bharat Trade Net (BTN) , a unified digital platform designed to ease the trade journey for exporters and importers. BTN will integrate e-documentation, trade financing, and customs clearance, making cross-border transactions faster, more transparent, and more secure. The platform is aligned with India's WTO Trade Facilitation Agreement (TFA) commitments and is expected to achieve full digitalization of trade processes by 2027.

While the spotlight is often on goods exports, India's services exports crossed $320 billion in 2024, led by robust performance in IT and Business Process Management (BPM), consulting and financial services, tourism, education, and research and development outsourcing. India remains a global leader in digitally delivered services, contributing significantly to the current account surplus and reinforcing its position in the global services economy.

Long-term implications of India's foreign trade policies

India's evolving trade policies are not just about exports and investments, they're about repositioning the economy for global leadership. Comprehensive free trade agreements and streamlined tariff structures will likely improve India's competitiveness in both goods and services sector. With a combined thrust on high-tech manufacturing, labour-intensive exports, digital infrastructure, and strong FTA engagement, India is laying the foundation to become a $5 trillion economy by 2029. 

These reforms are also designed to generate employment, particularly for India's youth, and boost per capita income over the long term. The National Manufacturing Mission, for instance, is aiming to generate over 22 lakh jobs for Indian youth. 

An opportunity for investors

For investors, the message is clear: India is open, competitive, and reform-ready. Strategic opportunities are abound in sectors like pharmaceuticals, electronics, renewable energy and defence. These sectors will likely see higher demand and better global access due to tariff cuts and trade agreements. It is also crucial to stay informed about updates on trade negotiations and policy announcements. Agreements with the US, EU, UK, and Indo-Pacific countries could create new markets and impact sector growth.

Long-term investors should consider infrastructure, logistics, and manufacturing. These sectors are undergoing large-scale modernisation to support India's export-led economy and rise as a manufacturing hub. Venture capital and private equity firms may also find value in startups focused on supply chain innovation, green technologies, and digital trade solutions. Overall, India's trade reforms signal a stable and promising environment. Investors should adopt a strategic approach and prepare for long-term growth. If you're looking for more information regarding investment in India, visit investindia.gov.in.