India's Multilateral Agreements 

India has consistently demonstrated a proactive approach to engaging with international trade and diplomatic agreements, marking its evolution as a significant player in global affairs.

Contributing Advisor

Lalitha Rao

Manager, Corporate Accounting Services

What are multilateral agreements?

Multilateral agreements (MLAs) are formal arrangements between three or more countries that establish common rules, principles, or goals for cooperation. Unlike bilateral agreements (which involve only two parties), multilateral agreements create broader frameworks for international collaboration across multiple nations.

Scope and structure

Typically, MLAs involve 3 or more countries working together on shared principles and operates through international organizations and forums. These forums create standardized rules that apply equally to all members.

Major types

Some of the most well-known type of this agreement include;

• Trade agreements (WTO with 164 member countries);
• Climate action (Paris Agreement with 196 countries);
• Regional cooperation (SAARC, BIMSTEC); and,
• Global governance (United Nations).

How are multilateral agreements impacting India’s business and economy?

BRICS impact

Multilateral trade agreements have introduced global competition across Indian industries, pushing businesses to elevate operational standards, adopt advanced technologies, and streamline supply chains. Sectors like IT, manufacturing, and logistics have benefited significantly by embracing international standards and technology transfers, positioning Indian businesses to meet future global trade demands, especially in the rapidly growing fields of digital trade and sustainable practices.

For example, India’s economic relationships within BRICS highlight both growth opportunities and challenges. Trade data show India’s strategic dependence on BRICS nations for energy and technology, particularly in imports from Russia and China, which have surged.

However, export dynamics reveal a more mixed picture. While exports to Russia and the UAE increased, exports to other BRICS nations, such as Brazil and Egypt, declined significantly, underscoring the uneven demand for Indian products in different BRICS markets.

Source: Department of Commerce, Ministry of Commerce and Industry, GoI

Source: Department of Commerce, Ministry of Commerce and Industry, GoI

Foreign direct investment (FDI) from BRICS nations also plays a role in India’s economic development, with the UAE leading in equity inflows, followed by China and Russia. This FDI strengthens India’s position in the BRICS coalition and aids in infrastructure, technology, and industrial growth. Diplomatically, India’s role within BRICS supports its broader foreign policy strategy, positioning itself as a bridge between the Global South and Western alliances. This strategy enhances India’s leverage in multilateral platforms, balancing relations with global powers while fostering stability within its regional partnerships.

Source: DPIIT

The BRICS agreements collectively bolster India’s multipolar engagement, expanding its economic reach and reinforcing its stance as a “global bridge” across geopolitical landscapes. India’s commitment to diversifying its alliances and trade partners highlights the nation’s strategic pursuit of autonomy and its ambition to shape a more balanced and inclusive global order.

Comparative analysis of FDI positioning

• Indonesia: $47.34 billion
• Vietnam: $36.61 billion
• India: $28 billion (UNCTAD)

Indonesia leads in total FDI volume, and Vietnam shows more dynamic growth and strategic positioning. Both countries demonstrate strong attractiveness to Asian investors. Vietnam shows more aggressive growth strategies, particularly in the manufacturing and technology sectors. Indonesia's FDI is more resource-driven, while Vietnam's is more technology and manufacturing-oriented.

While Indonesia and Vietnam demonstrate impressive FDI volumes through direct industrial strategies, India offers a more complex, diplomatically nuanced investment landscape. India's approach isn't about maximizing investment numbers but creating strategic, long-term global partnerships. Unlike Vietnam's direct manufacturing approach, India focuses on:

• Uses investments as geopolitical leverage
• Balances relationships between Global South and Western economies
• A more nuanced approach compared to direct economic expansion
• Prioritizes intellectual capital over pure manufacturing
• Strong emphasis on digital transformation
• Creating a global technology ecosystem
• Massive domestic market (1.4 billion people)
• Varied economic sectors
• Adaptable investment approach

India's evolving foreign policy

India has transformed from a non-aligned nation to a key player in both Western and non-Western alliances. Through BRICS, India positions itself as a "global bridge," promoting multipolarity while maintaining strategic autonomy. This evolution began with economic liberalization in 1991 and expanded through strategic partnerships across Asia.

Recent years show India's shift from policy-taker to policy-maker, particularly evident in global tax reform. As an early adopter of the Base Erosion and Profit Shifting (BEPS) initiative and Multilateral Instrument (MLI), India actively shapes international tax frameworks to prevent avoidance while fostering investment. Through focused partnerships like the UAE-Australia trade deals and participation in the Quad, India actively influences global economic governance and digital economy development.

The 2023 Kazan Summit highlighted India's pragmatic diplomacy, particularly in managing relations with China and Iran. As India pursues its US$5 trillion economy goal, it balances Western ties while championing Global South interests, demonstrating its evolution from non-alignment to strategic multi-alignment in global affairs, supported by targeted multilateral frameworks that protect revenue interests and promote fair competition.

What does it mean for investors?

India's evolving multilateral strategy presents both opportunities and considerations for investors. The trade data reveals several key investment trends:

First, the UAE emerges as a prime investment gateway, leading BRICS nations with US$15.4 billion in FDI equity inflows. This reflects India's strengthening economic ties with the Gulf region, offering investors potential opportunities in infrastructure, technology, and industrial development projects.

Second, the trade patterns with major BRICS partners indicate strategic shifts. The substantial growth in Russia trade (35.41% export growth, 32.34% import growth) suggests emerging opportunities in energy and commodities sectors. Meanwhile, China remains a dominant trading partner despite geopolitical tensions, with moderate growth in both exports (8.84%) and imports (3.28%).

However, investors should note the uneven performance across BRICS markets. Sharp declines in exports to Brazil (-39.29%) and Egypt (-14.33%) highlight the importance of market-specific due diligence. The data suggests that while BRICS offers diverse investment opportunities, success requires careful consideration of individual market dynamics and sector-specific trends.

For long-term investors, India's policy shifts toward global tax reform (BEPS and MLI) and focused bilateral trade agreements signal a more transparent and structured investment environment, particularly beneficial for those interested in the digital economy and sustainable development sectors.

Notable multilateral agreements signed by India in the last decade

Regional Comprehensive Economic Partnership (RCEP)

India was deeply involved in negotiations for the Regional Comprehensive Economic Partnership (RCEP), an ambitious trade agreement encompassing 15 countries in the Asia-Pacific region, including China, Japan, South Korea, Australia, and the ASEAN bloc.

However, in November 2019, after nearly seven years of negotiations, India made the strategic decision to withdraw from RCEP. The primary concerns driving this exit were rooted in protecting its domestic industries, particularly agriculture and manufacturing, from being overwhelmed by cheaper imports, especially from China. India feared that without sufficient safeguards, the influx of low-cost goods could harm local businesses.

The decision to withdraw also reflected India’s desire for fair and balanced trade agreements. Indian policymakers were seeking stronger protections, such as an automatic safeguard mechanism that could prevent a surge in imports, but these demands were not fully accommodated in the final draft of the agreement.

BRICS and India’s commitment to multilateral development

India's active participation in BRICS (Brazil, Russia, India, China, and South Africa) underscores its commitment to multilateral development, particularly in fostering global economic cooperation among emerging markets. As one of the founding members, India has consistently advocated for reforms in global governance institutions, such as the International Monetary Fund (IMF) and the World Bank, to reflect the growing influence of developing economies.

India’s role in BRICS is centered on driving economic and infrastructure development initiatives. The BRICS New Development Bank (NDB), which India played a key role in establishing, provides financing for large-scale infrastructure projects in developing nations. This initiative aligns with India’s own domestic priorities of building a robust infrastructure network to support its rapid urbanization and economic expansion.

Moreover, India has used the BRICS platform to push for technological cooperation, sustainable development, and trade partnerships that benefit its growth trajectory. The annual BRICS summits have become a venue for India to advocate for a multipolar world, emphasizing the need for a balanced global order that fosters inclusive growth and cooperation among both developed and developing nations.

Comprehensive Economic Cooperation Agreements (CECA)

In the past decade, India has strengthened its trade relationships through Comprehensive Economic Cooperation Agreements (CECA), particularly with key partners in Asia. Notable agreements include the India-Singapore CECA, signed in 2005 and continually updated to reflect evolving trade dynamics. This agreement has significantly enhanced bilateral trade, particularly in services, IT, and telecommunications, while also promoting investment flows between the two countries.

Similarly, the India-South Korea CECA, signed in 2009, has led to increased trade in sectors such as automotive, electronics, and steel, with South Korean companies becoming key players in India’s manufacturing ecosystem. These agreements underscore India’s focus on diversifying its trade portfolio by entering into mutually beneficial pacts with strategic partners.

Looking ahead, India is exploring opportunities for further economic cooperation with other nations, including those in the Indo-Pacific region and Africa. The potential for new CECA agreements with countries like Australia, Canada, and the UK is under discussion, driven by India’s ambition to expand its global trade footprint and secure access to new markets.

Current multilateral negotiations

India is actively engaged in several significant multilateral negotiations, reflecting its strategic interests and growing influence on the global stage. Among the most notable are its negotiations with ASEAN, African nations, and within the Indo-Pacific region.

ASEAN

India continues to strengthen its ties with the Association of Southeast Asian Nations (ASEAN) through the Regional Comprehensive Economic Partnership (RCEP). Although India opted out of RCEP in 2019, ongoing dialogues suggest a potential re-engagement, focusing on addressing India’s concerns about trade imbalances and protecting domestic industries.

Africa

India’s engagement with African countries is multifaceted, encompassing trade, investment, and development cooperation. The India-Africa Forum Summit (IAFS) serves as a cornerstone for these interactions, aiming to enhance economic ties and support sustainable development across the continent.

Indo-Pacific

In the Indo-Pacific, India is a key player in the Quadrilateral Security Dialogue (Quad) alongside the United States, Japan, and Australia. This partnership emphasizes a free, open, and inclusive Indo-Pacific region, with a focus on maritime security, infrastructure development, and economic cooperation.

Source: IndBiz, International Trade Administration.