2025 · GS Paper 3 · Q2 · 10 marks
What are the challenges before the Indian economy when the world is moving away from free trade and multilateralism to protectionism and bilateralism ? How can these challenges be met ?
In short
A shift to protectionism and bilateral deals threatens India's labour-intensive exports, invites dumping and weakens its voice in trade rules, and it is best met with diversified FTAs, domestic competitiveness and WTO reform. US tariffs on Indian goods reached 50% in August 2025.
Model answer
Ghissu Editorial · Verified 4 Oct 2026 · 291 words
Export shock
High US tariffs hit labour-intensive textiles, gems and jewellery and marine products, where many jobs sit.
Dumping risk
Goods shut out of the US and EU seek other markets, threatening Indian MSMEs with cheap Chinese steel and electronics.
Weaker voice in rules
A stalled dispute system and bilateral deals let big economies push labour, environment, data and patent demands beyond WTO rules.
Green barriers
The EU's CBAM, definitive from January 2026, raises costs for Indian steel and aluminium.
Calibrated FTAs
The UK CETA (July 2025), the EFTA TEPA in force from October 2025 and the EU FTA (January 2026) widen markets while guarding sensitive farm lines.
Competitiveness at home
PLI schemes, PM Gati Shakti and lower input tariffs cut costs and help exporters join value chains.
Multilateral leadership
India can lead developing members to restore the Appellate Body and resist unilateral trade-environment measures such as CBAM.
Financial buffers
RBI's 2022 framework for rupee invoicing and ample forex reserves cushion currency and sanction shocks.
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This chapter in the exam
Liberalization9 questions
Asked in 6 of 14 sittings since 2013
- 2018How would the recent phenomena of protectionism and currency manipulations in world trade affect macroeconomic stability of India?
- 2016How globalization has led to the reduction of employment in the formal sector of the Indian economy? Is increased informalization detrimental to the development of the country?
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Question from the official UPSC Civil Services (Main) Examination 2025 paper. Answer written by Ghissu's engine and checked against our editorial standards. Found an error? Tell us and we correct it within 48 hours.