India’s global trade standing is set to strengthen, according to Arvind Panagariya, Chairman of the 16th Finance Commission. Panagariya noted that India will emerge stronger from the ongoing tariff uncertainty, especially if the bilateral trade agreement with the United States is successfully negotiated. This agreement, which is expected to be finalised by Fall 2025, will place India in a very favourable position in the global trade equation, he emphasized during a recent statement.

The US-China trade conflict and the trade restrictions imposed by the United States on countries like China, Vietnam, and Cambodia will create an opening for India to capitalize on the shifting dynamics. Panagariya believes that these changes will give India the leverage it needs to enhance its position in global trade discussions.

"The US clearly wants to decouple from China, and this trade conflict will likely persist. There has been a long-standing view in the US that China has acted unfairly in trade relations," said Panagariya, reflecting on the changing global economic landscape.

As the US continues to recalibrate its global trade strategy, with reciprocal tariffs and changing policies, India will need to act strategically. Panagariya indicated that in the next three months, the challenges and opportunities for India will become clearer. If India successfully finalizes the trade deal with the US, there is also the possibility that it could pave the way for future agreements with other economic powerhouses like the European Union and the United Kingdom. Such deals will position India strategically in the global trade equation.

US Trade Policy and India’s Strategic Opportunity

The US decision to impose tariffs on countries with which it faces a trade imbalance has triggered a wave of uncertainty in global trade. President Trump’s actions on April 2, 2025, which escalated trade tensions, were followed by a 90-day pause in these tariffs announced on April 9, 2025. The ongoing global trade uncertainty has created a vacuum that India may now be poised to fill.

India, with its competitive advantages in several key industries, can leverage these geopolitical shifts to strengthen its manufacturing sector and expand its export potential. However, Panagariya pointed out that with these opportunities come challenges that India will need to address. Labour and land reforms are critical to India’s manufacturing growth, and Panagariya anticipates increased pressure on the government to push these reforms forward in order to fully benefit from the trade shifts.

Reforms Required to Strengthen Manufacturing

To fully capitalize on these new opportunities, Panagariya believes that India must accelerate its labour and land reforms. The manufacturing sector, which has been a priority for India’s growth, will require both flexible labour laws and easier access to land to ensure that it can compete effectively on the global stage.

"India will face pressure to push labour and land reforms to make manufacturing more competitive. These reforms are essential for long-term growth," said Panagariya, acknowledging the internal challenges India will have to address to match the global trade dynamics.

As India enters a critical phase of its negotiations with the United States, Panagariya’s insights provide a broader view of how global trade tensions can translate into significant opportunities for India. The US trade deal will play a pivotal role in shaping India’s economic future, but the country will need to act swiftly and decisively on structural reforms to maintain its competitive edge in the evolving global economy.

Conclusion

The unfolding trade shifts, particularly US trade restrictions on China and other Asian nations, are positioning India to be a more dominant player in global trade. Arvind Panagariya’s statement underlines that India, if it successfully negotiates a bilateral trade agreement with the US, could unlock substantial economic advantages. However, to fully seize these opportunities, India must also address the pressing need for labour and land reforms to boost its manufacturing sector.

In the coming months, all eyes will be on India’s negotiations and its ability to implement key reforms, with the goal of cementing its role in the global economic landscape.

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