Articles

Global economic engagement is and was riddled with contradictions. We aspired for growth yet feared competition. This diffidence shaped our early approach to trade. PM Narendra Modi has acted with panache. The present engagement on FTAs with the EU and US represents a discontinuity with the past. The US deal is not an isolated initiative but integral to a long, uneven journey from protectionist to purposeful participation in global trade.

After Independence, barter trade was inescapable. In the gray corridors of the Soviet bloc, we swapped tea for machinery and rice for oil. It was a world where freedom of choice was traded for the comfort of certainty. State entities like the State Trading Corporation and the Mines and Minerals Trading Corporation canalised foreign trade in a debilitating trade regime. I witnessed this caution firsthand in 1973 while negotiating concessional oil with the Shah of Iran as the global economy buckled under the first oil crisis. Today, however, our deepening engagement with the United States represents the shedding of that protectionist skin.

In an earlier article (‘History doesn’t end today, our old compass has run its course’, IE, December 31, 2025), we examined India’s policy challenges in an unsettled global environment. This article revisits that framework. Assessing the Union Budget against the templates we had outlined, we find that it has been marked by much greater openness to recognising trade as an engine of growth. The Finance Minister’s mantra this year has been capital, technology, and export competitiveness. This philosophy was behind the trade agreements with the EU and the UK, as well as Australia, the UAE and Oman.

Yet, geopolitical uncertainty has intensified debates on inflation and growth, capital flows, currency management, and India’s attractiveness as an investment destination. The US and China deploy tariffs, export controls, and licensing regimes, while restrictions on advanced technologies signal a fragmented order.

Tomorrow, as we begin the new year, we seek a new elusive compass. We have relied on a compass that had run its course. We were forewarned that “the old world is dying and the new world struggles to be born”. Instead, after a long period of complacency, we now face fractured trade and supply chains, politicised finance, geopolitical tensions, and rudderless multilateral institutions. No rulebook commands universal trust.

This year’s defining story could be the requiem of the post-Cold War order. Not through a single collapse but through a thousand cuts. The leadership change in Washington supercharged great-power rivalries. As the ghost of mercantilism displaced multilateralism, India held on to its faith in a multilateral rules-based order and national interest as the compass of independent foreign policy.

NK Singh said India’s appeal to global investors hinges on fiscal discipline across the “general government” — the Centre and states together — arguing that cooperative federalism, combined with competitiveness-driven growth, is essential to sustaining the economy’s long-term momentum.

Singh stressed on the need for continued belief in the synchronisation of stable macroeconomic policy with monetary and fiscal policies acting in tandem

Jayasankar Krishnamurty, born on January 7, 1941, in New Delhi, to Parvati and S Jayasankar, passed away on December 5, 2025. He was an eminent academic and international civil servant who worked for decades on employment, labour and demography, with a distinguished academic career, completing his BA (Hons) in Economics from St Stephen’s College, his MA from the Delhi School of Economics, and his PhD from the University of Delhi. A defining milestone was his selection as Agatha Harrison Fellow at St Antony’s College, Oxford, which left a deep imprint on his intellectual journey. These academic embellishments are daunting. But for me, he was my closest friend. My friendship with him is a journey I must recount.