With India set to become the world’s third-largest economy, the country’s global ambitions are coming into clear focus
AFP
In this photo taken on October 13, 2021, an employee connects solar cells at the Vikram Solar manufacturing plant in Oragadam, in the southern Indian state of Tamil Nadu.
In March, India’s external affairs minister, S. Jaishankar, addressed the UK’s business community at an event in Manchester. He delivered a clear message: India is open for business and has the means and resources to reach its goals.
“At the end of the day, for us, the world has more opportunities than challenges,” he said, stating that India was looking to promote global trade, mobility, and exchange – principles closely aligned with the Modi government’s ‘India Rising’ narrative. This ambition is tied to a bold national goal: to celebrate the centennial of India’s independence in 2047 as a fully developed country.
So, what does India’s outlook look like in terms of global trade? And where will new opportunities emerge in 2025?
The European Union
Europe remains India’s largest trading partner by most estimates. In 2023, it exported goods worth approximately €65bn and services worth €28.5bn to the EU. Over the past decade, the trade in goods has almost doubled, while the trade in services has seen similar growth in just three years.
A free trade agreement between India and the EU is expected by the end of 2025. Using Trump-like hyperbole, European Commission President Ursula von der Leyen, during a recent visit to New Delhi, called it one of “the defining partnerships of this century” and “the largest deal of its kind anywhere in the world”.
Europe remains India's largest trading partner by most estimates. In 2023, it exported goods worth approximately €65bn and services worth €28.5bn to the EU
The deal is expected to cover some of the key industries defining technological growth and innovation— semiconductors, AI, and clean energy. Among the more traditional industries, the EU is hoping to benefit from lower tariffs on automobiles, wine, and whisky, while India is looking to strengthen its pharmaceutical and textile exports.
However, negotiations face a number of challenges. India has raised concerns about the impact of subsidised European agricultural goods on local farmers, while the EU is keen to retain strict environmental regulations and carbon taxes on sectors such as steel, aluminium, and cement. This could cause headaches for Indian exporters. Still, both sides are pushing hard for a deal, and it seems likely that 2026 will herald a new dawn in trade between India and the EU.
The United Kingdom
Although the UK is not among India's top 10 trade partners, recent developments have aimed to change that. In February, officials from Prime Minister Keir Starmer's government arrived in New Delhi to restart talks on a UK-India trade deal. The UK's Secretary of State for Business and Trade, Jonathan Reynolds, described it as a "no-brainer", noting that India was set to become the world's third-largest economy within three years.
A free trade deal between the two nations was finally signed in early May, with the tariffs on 99% of Indian exports to the UK, including medicines, diamonds, and machine parts, to be removed. Meanwhile, the UK will see a 90% tariff reduction on goods exported to India, with most becoming tariff-free within a decade. These goods include whisky and wine, as well as metal, cars, machinery, and integrated circuits. The deal is expected to increase bilateral trade by £25.5bn by 2040.
US President Donald Trump meets with Indian Prime Minister Narendra Modi at the White House in Washington, DC, US, February 13, 2025.
The United States
When it comes to the US, the elephant in the room is Donald Trump and his insatiable appetite for tariffs. Ahead of Indian Prime Minister Narendra Modi's visit to the White House in February, Trump referred to India as a "very big abuser" of trade ties with the US, although he balanced that critique with a compliment of Modi as a "fantastic man".
The US is India's largest trade partner, with total trade valued at around $129bn in 2024. In contrast, India barely makes it into the US's top 10. However, with new tariffs disrupting America's trade with Mexico, Canada, and China, India could be a prime beneficiary of increased demand, especially for electronics, tech, and jewellery.
Trump has been vocal about the trade deficit with India, which stood at $45.7bn in 2024. India is also notorious for its own protectionist tariffs. And while Modi's visit to the White House was largely hailed a success, a full trade deal remains elusive, despite Modi skilfully adding a defense deal on acquiring F-35s into the mix.
Following their meeting in February, the two leaders stated that the first phase of a mutually beneficial bilateral trade agreement would be concluded in seven or eight months. In March, India's commerce and industry minister, Piyush Goyal, met the newly appointed US trade representative, Jamieson Greer, and further talks are scheduled. The likely outcome is that India will reduce some of its tariffs, unlocking increased commerce with the US and boosting bilateral trade.
Saudi Crown Prince Mohammed bin Salman Al Saud receives Indian Prime Minister Narendra Modi at Al-Salam Palace in Jeddah, April 22, 2025.
The GCC
Another important market for India is the Arabian Gulf. Trade with the GCC reached $162bn in 2024, with around $84bn going to the UAE and $44bn to Saudi Arabia. Besides the historical connections, these countries are home to sizeable Indian populations, and investment is significant. During a speech in Abu Dhabi earlier this year, S. Jaishankar said most people were unfamiliar with how intense these ties are.
"The energy dimension is the most visible, but there is much more to it than that," he said. "We have significant interests in fertilisers, energy, water, diamonds, defence, and cyber. Our projects include airports, ports, and railways, as well as phosphates, green hydrogen, steel, and submarine cables."
Although growth in trade between India and the GCC has been modest in recent years—just 10.5% over the past half decade—the diversity of investment points to long-term potential.
A diversity of partnerships
India has significant trade deficits with Russia and China. Benefiting from cheap fuel during the Russia-Ukraine war, India has imported more than $60bn worth of goods from Russia and exported only $4bn. The trade deficit with China is even larger. In 2023, it imported over $100bn worth of goods and exported just $16.6bn.
Meanwhile, India's ascendancy in global trade is underscored by its broad range of partners across multiple regions. Only the US enjoys a double-digit share of India's exports (17.7%), with the EU as a bloc comparable in size, and the GCC at 12.9%. In terms of imports, China leads at 15%, followed by Russia at 9.1%, while the GCC and the EU have collective totals of 14.5% and 12.1%, respectively.
This paints a picture of a nation poised for a boom in global trade. Modi's India is increasingly comfortable in its new role as a world player, both in terms of political and economic clout. As S. Jaishankar said during his Manchester speech: "When India looks at the world, it does so confidently."
