How would the recent phenomena of protectionism and currency manipulations in world trade affect macroeconomic stability of India?

Shows how India is cushioning itself against protectionist shocks by securing diversified market access.

• Argue that the FTA reduces dependence on the US market amid tariff volatility.
• The EU will remove tariffs on 99.5% of items it imports from India, with most moving to zero immediately; rollout is expected in early 2027 after European Parliament approval.
• Gains are not assured: CBAM charges on carbon-intensive exports such as steel and aluminium could offset tariff cuts.

Shows market diversification as India's buffer against protectionist shocks.

• Attribute India's FTA push to China+1 opportunities and US tariff uncertainty.
• New Zealand removes tariffs of up to 10% on all Indian exports, helping textiles, leather and footwear, gems and jewellery, engineering goods and processed foods.
• India cuts or removes tariffs on about 70% of its tariff lines, covering about 95% of New Zealand's exports by value, while keeping dairy out.

Use the latest BoP data to show how external shocks reach India through the trade deficit and volatile portfolio flows, and which inflows stabilise it.

• The merchandise trade deficit rose to $86.1 billion from $68.9 billion a year earlier; higher commodity prices raise the import bill.
• Portfolio investors took out a net $9.6 billion against an inflow of $1.6 billion a year earlier, producing an $8.1 billion BoP deficit met by drawing down reserves.
• A CAD of 0.5% of GDP is modest against 4.8% in 2012-13; stress that the concern is financing, with FDI, services exports and remittances as main stabilisers.

Use the RBI swap window as an example of how external pressure on the rupee threatens stability, and of the policy tools and costs involved.

• The RBI's special USD-INR swap facility, opened on 8 June 2026 when the rupee was under pressure, drew $136.38 billion by 31 August, $127.23 billion through FCNR(B) deposits.
• In 2013, during the 'taper tantrum' over US Federal Reserve signals, a similar window raised about $34 billion at a concessional swap rate of 3.5% a year.
• Commentators flag a 'redemption cliff' when deposits mature; a swap buys time but does not correct a current account gap, so stable inflows through exports and FDI are needed.

Use local currency settlement and payment-system links as measures India can adopt to reduce exposure to external currency and trade shocks.

• BRICS members want payment channels that cannot be easily disrupted by others' decisions; the Kazan Declaration (2024) backed local currency settlement and stronger intra-BRICS correspondent banking.
• India joined Project Nexus to link instant payment systems such as UPI; in 2025 six central banks including the RBI set up Nexus Global Payments to take it live.
• Keep payment links bilateral or modular so that India controls its exposure to any single partner, and avoid being drawn into a bloc currency.

Tariff escalation between highly integrated economies illustrates how protectionism disrupts trade flows that exporters like India depend on.

• Canada supplies 70% of the oil refined in the U.S. Midwest and 60% of U.S. aluminium demand, yet the two are now in a tariff dispute, per the editorial.
• The USMCA, with a 16-year term to 1 July 2036, faces annual reviews after the U.S. declined to renew it, turning a stable pact into an uncertain one.
• India's 18% tariff arrangement with the U.S. (February 2026) was followed by U.S. investigations, showing that negotiated terms do not guarantee stability.

EU carbon border and steel overcapacity measures are current forms of protection that squeeze Indian exports, affecting trade balance and growth.

• The EU's CBAM entered its definitive phase on 1 January 2026, requiring importers of iron and steel, cement, aluminium, fertilisers, electricity and hydrogen to buy certificates for embedded carbon.
• A new EU regime against global steel overcapacity took effect on 1 July 2026, and India's FTA steel quota of 1.64 mt is well below its exports of about 4 mt.
• Response: ICRIER recommends higher value-added steel to cut the CBAM burden; also cut emissions and seek recognition of Indian carbon prices.

Shows how curbs on skilled migration can affect India's services earnings, remittances and IT delivery model.

• Indians are the largest group of H-1B beneficiaries, so the $100,000 fee and layoff-linked vetting fall most heavily on Indian professionals and IT services firms.
• Note that slower migration may weaken a key source of remittances and diaspora links.
• List likely effects for India: fewer onsite postings, more local hiring by Indian firms in the US and more work delivered from India.