Government economists have warned that bilateral and regional trade agreements that weaken or replace the existing multilateral trading system could pose risks to India’s economic growth and exports. According to the Department of Economic Affairs, such agreements may lead to greater trade diversion, higher trade costs, and increased uncertainty, complicating international trade and potentially reducing global commerce's efficiency and predictability.
The economists cautioned that growing fragmentation of the global trading system could shift trade flows away from the most efficient suppliers and introduce varying rules and market-access conditions. For India, this could challenge exporters and affect the nation’s ability to sustain strong export growth and wider economic expansion.
Simultaneously, government economists acknowledged that India is pursuing a diversified trade strategy. Bilateral and regional trade agreements are part of this approach as India aims to expand market access and strengthen relationships with various countries and regions. However, India does not intend to replace the multilateral framework through these agreements.
The report underscores that the World Trade Organization (WTO) should remain central to the global trading system. India continues to support a rules-based multilateral framework while exploring additional bilateral and regional deals. Maintaining the WTO’s role is crucial for establishing common rules and enhancing stability and predictability in international trade.
The warning reflects a balanced approach in India’s trade policy: diversifying trading partnerships while preserving the multilateral system. Government economists emphasize that agreements outside or contrary to the multilateral framework risk increasing fragmentation, trade costs, and uncertainty. In contrast, a functioning WTO-based system offers a common foundation for international commerce and supports India’s long-term growth and export goals.
