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A renewed effort to integrate into global trade and investment A Handicap
networks could catalyze the growth acceleration needed to
meet India’s ambition of achieving high-income status by Consider the Regional Comprehensive Economic Partnership
2047. The intimate link between international trade, (RCEP). The bloc now covers nearly one-third of global GDP
manufacturing, and long-run growth is supported by a large and integrates supply chains across East and Southeast Asia.
literature linking trade exposure to the adoption of modern Vietnam and Malaysia enjoy tariff-free access within RCEP;
technologies, faster productivity growth, and the creation of Indian exporters do not.
well-paying jobs in the formal economy. 1
In addition, Indian exporters face higher cost of production
A Challenging Environment from domestic tariffs. Unlike Vietnam or Malaysia, India still
levies above-average tariffs on imported intermediate
Yet, the global environment is less benign than in the 2000s: goods—the components, parts, and raw materials that
trade tensions are rising and global supply chains are being manufacturers need to compete abroad. On average, India’s
reshaped along geopolitical lines. India now faces a window of tariffs on intermediate inputs are more than twice as high as
opportunity for its firms to integrate to global supply chains those in other EMDEs (Figure 1C).
across a wide range of economic partners.
1C Tariffs on Intermediate Inputs in Main Exporting
When US trade policies change, Sectors (%)
the effects ripple widely across IND Other EMDEs, median
Indian exporters 12

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Today, roughly one-fifth of India’s goods exports go to the
United States—more than to any other country. Services 4
exports, especially information technology and back-office
support, are more concentrated and this concentration has 0
Fuel, Metals
served India well in periods of strong US demand. But when Textiles Electronics, Business
US trade policies change, the effects ripple widely across Pharma, Chemical Machinery, and Services
Indian exporters. Transport Equipment

Efforts to further diversify export markets could strengthen
economic resilience. Europe, Asia, Africa, and Latin America are
markets with growing demand for both goods and services. Notes: EMDEs = emerging market and developing economies; IND = India
Asia already accounts for almost one-third of India’s goods Tariffs on intermediate inputs are calculated as the weighted average
exports, but India is absent from many of the region’s trade across inputs (split from HS6 product codes using the Classification by
pacts that competitors leverage for market access (Figure 1B). Broad Economic Categories) used in the respective sectors
Tariff data are the latest available, trade and input shares use 2023 data.
For Sri Lanka, includes para-tariffs
1B Market Size of Trade Agreements, 2023
(% of global GDP) In global supply chains, this can become a handicap. A
Vietnamese garment exporter can import fabric duty-free under
Under negotiation EMDEs
80 regional trade pacts and sell finished shirts tariff-free to
markets like Japan. An Indian exporter pays duties on imported
60 textiles and then faces tariffs in Asian markets it has not
established agreements with. Scale and labor force advantages
40 are blunted by cost.

20

0
MEX VNM IDN IND

Notes: MEX = Mexico; VNM = Vietnam; IDN = Indonesia; IND = India
FTA-covered trading partner's share in global GDP in 2023. India is currently
negotiating with Australia, Canada, the European Free Trade Association, the
European Union, the Gulf Cooperation Council, the United Kingdom, and the
United States
Blue shades denote interquartile ranges for 124 (A) and 29 other EMDEs (B)
respectively

1 World Bank. 2025. South Asia Development Update: Jobs, AI, and Trade. October. Washington, DC: World Bank.
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