Budget and trade strategy must counter global risks, move beyond US dependency

As global trade talks remain shaky and India-US negotiations continue without a clear direction, Dr Ram Singh, Professor and Head at the Indian Institute of Foreign Trade, says New Delhi must resist pressure to rush into concessions that could hurt farmers, energy security and long-term policy freedom. 

In an interview with Malayala Manorama, Dr Singh argues that India has already put some of its best offers on the table, even as the US trade position keeps shifting due to domestic politics. He explains why agriculture and dairy must remain firm red lines, why labels like "tariff king" are more rhetoric than reality, and why India's Budget and trade strategy should focus on financial support for exporters, diversification beyond the US, and safeguarding sovereign choices in an increasingly uncertain global order.

The Union Budget is being presented amid heightened geopolitical tensions and global trade uncertainty. From a trade policy perspective, what key priorities should the Budget address to safeguard India's interests and improve resilience?

The Union Budget is being framed amid geopolitical churn, fragmented trade regimes, and heightened uncertainty across tariffs, technology, and supply chains. From a trade policy lens, India has already taken pragmatic steps to cushion stress: GST rationalisation to revive domestic absorption, creation of an Export Development Fund to ease credit frictions, extension of export proceeds realisation from nine to 15 months to manage liquidity strain, selective review of FTAs with persistent trade deficits, and a calculated initiatives towards export diversification through partners such as the UK, New Zealand, Oman, and the proposed EU FTA. These measures signal continuity, caution, and strategic recalibration.

However, lingering uncertainty around an India–US trade arrangement, sanctions spillovers, and stretched supply chains demand deeper financial strengths. The Budget should align pre- and post-shipment finance tenures with the extended export realisation period, easing working-capital asymmetry- especially as peers like China allow far longer windows in stressed sectors. 

Simultaneously, expanding rupee lines of credit to the Middle East, Africa, Eastern Europe, and LATAM can boost exports while dampening structural trade deficits and long-run currency erosion, which otherwise raises import and borrowing costs despite short-term export gains.

India must preserve procurement autonomy, particularly in energy and critical inputs, resisting extraterritorial pressures, secondary sanctions, or tariff threats. Illustratively, the global experience shows that compliance rarely ends demand; autonomy can yield tangible savings in the import bill. Domestically, export-facing units in textiles, gems and jewellery, leather, handicrafts, toys, and sports goods- especially those exposed to US tariff shocks- need liberalised DTA sale approvals for EOUs, MOOWR, and SEZ units to sustain capacity, employment, and cash flows during demand dislocations.

Moreover, to sustain trade with sanction-affected markets, India should fast-track BRICS-CBDC–based settlement mechanisms- focused on de-risking (De-SWIFTing) and continuity rather than ideological de-dollarisation. Concurrently, the Budget should prioritise sectors witnessing global import expansion amid systemic ruptures: defence, engineering, electronics, electricals, and pharmaceuticals. Accelerating trade negotiations with EAEU, Israel, MERCOSUR, Peru, and others would further hedge market risk and expand preferential access.

Finally, trade power and perseverance increasingly rest on the knowledge economy. The Budget can be expected to signal support for Global Capability Centres, AI and data infrastructure, quantum and nanotechnology applications, space-linked services, and enabling inputs such as GPUs and small modular reactors. In parallel, India should deepen services exports while launching targeted import-substitution programs in shipping, logistics, shipbuilding, MRO, and insurance- reducing external dependence and strengthening invisible earnings through scale, sophistication, and strategic foresight.

The Finance Minister has indicated that comprehensive customs reforms are on the agenda. What specific changes can we expect in this area? Should we anticipate revisions to customs tariffs alongside amendments to existing legislation?

The Finance Minister's reference to comprehensive customs reforms should be read as a sign of scaled, execution-oriented change rather than a sweeping overhaul. In practical terms, we can expect selective customisation of tariff lines, targeted rationalisation of inverted duty structures, and procedural or legislative amendments to improve ease of doing business. Given India's expanding network of FTAs and bound tariff commitments, large-scale tariff revisions are unlikely; instead, the emphasis will be on fine-tuning rather than tariff activism.

Equally important is the institutional dimension of reform. Experience suggests that no customs reform, however well designed, can succeed unless all stakeholders are genuine participants. This includes customs officials, the trade community, port and terminal operators, customs brokers, and logistics service providers. Many trade facilitation initiatives under the WTO Trade Facilitation Agreement have struggled not because of a lack of intent, but because of uneven adoption, behavioural rigidities, and weak on-the-ground ownership. In this context, changing mindsets, strengthening accountability, and fostering trust between regulators and traders are as critical as rule changes.

Therefore, the policy priority should shift from announcing new schemes to ensuring the credible execution of existing frameworks. Simplification of procedures, predictable assessments, reduced discretion, and faster dispute resolution can deliver far greater dividends than headline reforms trapped in a bureaucratic labyrinth. A measured, consultative, and pragmatic approach- focused on consistency, transparency, and stakeholder confidence- would best align customs reforms with India's trade competitiveness and flexibility objectives.

The future trajectory of a proposed free trade agreement with the United States remains unclear. How do you assess the current state of discussions, and what approach should India adopt to move the negotiations forward?

The current state of India–US free trade discussions reflects strategic ambiguity rather than policy drift. India has consciously adopted a balanced and prudent approach aimed at preserving future policy latitude, geostrategic autonomy, and protecting vulnerable domestic sectors such as agriculture and dairy. Equally, India has remained firm on safeguarding sovereign choices in critical areas, including energy sourcing and access to strategic minerals. It is worth noting that India has already placed some of its most favourable and flexible offers on the table—an assessment that has been publicly acknowledged by US negotiators themselves.

However, the broader negotiating environment remains unsettled. The United States' trade posture, shaped by domestic political cycles and an increasingly transactional worldview, has created a state of flux that is unlikely to stabilise before late 2026, and possibly beyond. The US experience with both allies and adversaries indicates a pattern of incremental and often asymmetric demands, where reciprocity and rule-based discipline are not always consistently applied. In this context, quid pro quo cannot be presumed as a given.

Given these realities, India's room for further concessions is limited. The onus now lies with the United States to clarify its strategic intent and negotiating red lines. Meanwhile, India's choice to diversify trade partnerships through new FTAs, co-production arrangements, and issue-based cooperation reflects quiet resilience rather than disengagement. This approach allows India to remain constructively engaged with the US, while simultaneously hedging risks and strengthening its bargaining position in an increasingly fragmented global trade order.

There is a perception that India faces pressure from the United States to accommodate several demands, particularly in sensitive sectors such as agriculture and dairy. How do you view this concern, and where should India draw its red lines?

The concern that India faces sustained pressure from the United States in sensitive sectors such as agriculture and dairy is not unfounded, but it is equally important to recognise that India has already drawn clear and credible red lines. India has categorically refrained from offering any tariff concessions or market access commitments in the agriculture and dairy sectors, which are intrinsically linked to farmer livelihoods, food security, and rural stability. In addition, well-established non-tariff measures- such as restrictions on blood-meal–based dairy inputs and genetically modified crops- serve as legitimate policy instruments to safeguard domestic interests. India's offer framework, covering nearly 95 per cent of tariff lines, deliberately excludes these vulnerable segments.

At the same time, Indian negotiators have demonstrated measured flexibility where national interests permit. This includes openness to quota-based imports of GMO soybean and maise strictly for ethanol blending, as well as conditional, quota-free imports of non-GMO soybean to meet edible oil demand. India has also extended generous market access in agricultural products where domestic production capacity is limited, such as almonds, walnuts, pistachios, certain fruits, and other nuts, signalling constructive engagement rather than defensiveness.

India's stance is therefore principled and pragmatic. National interest, policy latitude, and geostrategic autonomy remain non-negotiable, and decisions of this magnitude will be taken in Delhi, not Washington. Experience suggests that concessions rarely close demands- give an inch and a mile is sought. Drawing firm red lines, while offering selective, transparent flexibility, is thus essential to preserving both negotiating credibility and domestic legitimacy.

The US President has previously described India as a 'tariff king'. How should this criticism be interpreted? Does India need to lower its tariff structure significantly, or is there a case for maintaining the current approach?

The description of India as a "tariff king" should be viewed largely as rhetorical signalling rather than an evidence-based assessment. Prima facie, the claim does not withstand scrutiny. India has already offered zero-duty market access on nearly 95 per cent of tariff lines, moved towards the abolition of the digital services tax, enabled self-declaration of certificates of origin, committed a share of gas sourcing from the US, expanded crude oil purchases, permitted quota-based agricultural imports, and significantly deepened defence procurement and cooperation. India has also opened its services sectors, extended cooperation in the Indo-Pacific, supported US-led counterterrorism initiatives, engaged actively on critical minerals, and partnered closely on semiconductors, AI, quantum computing, and i-CET frameworks.

This record reflects not protectionism but strategic patience and evaluated accommodation. Yet experience suggests that compliance alone does not necessarily moderate demands. US trade behaviour has increasingly appeared obdurate and capricious, often blurring distinctions between allies and adversaries in pursuit of short-term leverage. In such an environment, unilateral tariff compression would neither guarantee reciprocity nor strategic stability.

India's tariff structure, therefore, serves a developmental purpose- protecting vulnerable sectors, enabling industrial upgrading, and preserving policy space in a fractured global economy. Rather than reacting to narrative-driven criticism, India should remain focused on domestic growth priorities and external hedging strategies suited to a BANI world. The case is not for indiscriminate tariff reduction, but for disciplined, interest-led trade policy anchored in flexibility, credibility, and national development.