India’s Trade Landscape Amid Global Geopolitical Shifts: BCG Report Insights

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A new BCG report highlights how changing global trade dynamics, including potential increases in US tariffs following President-elect Trump’s inauguration, could impact India’s trade and economic growth. We look at key report insights impacting India’s export-import trade.

The Boston Consulting Group’s (BCG) latest report (January 2025), Great Powers, Geopolitics, and the Future of Trade, highlights how changing global trade dynamics, including new US tariffs, could impact India’s trade and economic growth. The report analyzes potential effects of a 20 percent tariff on Indian goods exported to the US, along with broader shifts in global trade routes.

Impact on key sectors in India

The proposed tariffs could affect several of India’s key export sectors, including textiles, pharmaceuticals, and IT services. Tariffs would increase costs for Indian exporters, potentially reducing their competitiveness in the US market. In the consumer goods sector, Indian manufacturers could face higher barriers, prompting the need for diversified export strategies.

Geopolitical shifts in global trade

The BCG report underscores how geopolitical tensions are reshaping trade alliances. Global trade is projected to grow at 2.9 percent annually over the next eight years but shifts in major trade blocs could accelerate or decelerate growth for specific regions, including India. The report outlines two major trends: North America’s reduced reliance on Chinese imports and China’s intensified focus on the Global South.

India’s growing role in global trade

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India’s trade is poised for significant growth, with BCG forecasting a 6.4 percent compound annual growth rate (CAGR) through 2033. Annual trade volumes could reach US$1.8 trillion, driven by government incentives like the Production Linked Incentive (PLI) schemes, improvements in infrastructure, and India’s position as an alternative production hub to China.

Key trade partners for India according to BCG:

  • United States: Annual trade with the US is expected to double to US$116 billion by 2033, reflecting stronger economic ties.
  • European Union and ASEAN: Trade with the EU and ASEAN is projected to grow by 80 percent over the next decade, supported by free trade agreements and deepening partnerships.
  • Africa and Mercosur: Bilateral trade with African and Mercosur nations is expected to nearly double, opening new opportunities for Indian exporters.
  • Australia and South Korea: Trade volumes could triple due to strategic agreements and increased collaboration in energy and technology.

Despite robust growth projections, India’s trade relationship with China remains strained due to its growing trade deficit, geopolitical concerns, and border disputes.

Implications for companies in India

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There are several strategic recommendations for companies in India to navigate the evolving global trade dynamics:

  1. Build resilient supply chains: Companies must diversify sourcing strategies and strengthen relationships with key suppliers. Investments in real-time monitoring systems and “supply chain control towers” can enhance resilience and enable quick responses to disruptions.
  2. Develop geopolitical awareness: Indian businesses should embed geopolitical risk analysis into strategic planning. By anticipating changes in trade policies and tariffs, companies can proactively adjust their operations and seize new opportunities.
  3. Leverage growth markets: Expanding presence in high-growth regions like ASEAN, Middle East and Africa, and Latin America will secure long-term growth. Local partnerships and investments in these regions can enhance competitiveness.
  4. Adopt nearshoring strategies: Nearshoring production to countries with favorable trade agreements like the UAE and Vietnam can help reduce costs and improve supply chain resilience.
  5. Pursue regional differentiation: Tailored business strategies for different regions, combined with localized technology solutions, will enhance flexibility and ensure success in a fragmented global market.

Conclusion

India’s trade growth potential, coupled with its strategic initiatives, positions it as a key player in the evolving global trade landscape. However, to capitalize on these opportunities, Indian businesses must adopt agile strategies, strengthen supply chains, and focus on high-growth markets. By aligning with global shifts and building resilience, India can cement its position as a leading trade partner in the years ahead.

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