India's split-personality trade policy needs a reset

India's trade diplomacy appears to suffer from a split personality. Its bilateral persona lives in the fast lane - setting ambitious targets, accepting far-reaching commitments, and displaying a striking appetite for closing deals.

Between 2021 and mid-2026, India signed 7 bilateral and regional trade agreements. Agreement with the EU has been successfully concluded, while negotiations with the US are at an advanced stage.

India's other trade persona emerges at multilateral fora, where it remains in the slow lane - adopting a defensive posture, finding inventive ways to reject new proposals, and earning a reputation as one of the principal disruptors at WTO. More baffling still, India has maintained its defensive stance on issues that are difficult to justify on grounds of national interest.


Here are 3 areas where the economy has undergone a transformation, yet parts of its trade diplomacy remain trapped in an outdated anti-US, socialist mindset.

Goods or services? Consider WTO's moratorium on customs duties on electronic transmissions. Introduced in 1998, when India's IT and BPO sectors were nascent, software, films and music were sold on CDs and DVDs, generating customs revenue. Today, India is the 4th-largest exporter of digitally delivered services, with an annual trade surplus of more than $200 bn.

Yet, in March, and against the advice of Nasscom, India maintained that online software, films and music are not services but goods and, therefore, it wants to retain the right to tax them.

Two steps forward... Investment Facilitation for Development Agreement (IFDA) seeks simpler, more transparent and more predictable procedures for foreign investors without requiring additional liberalisation of FDI regime.

India, with nearly $36 bn in outward FDI in 2025 and ranking among the top 20 exporters of foreign investment, opposes the agreement. At the 14th WTO Ministerial Conference (MC14) in Yaounde, Cameroon, 129 countries supported incorporating IFDA into the WTO framework. India was the lone dissenter.

MSME question Improving competitiveness of MSMEs is one of the GoI's top priorities. Yet, India's not part of WTO's MSME Informal Working Group, which has 106 members as of June, and accounts for around 90% of world exports.

India's 2-speed trade diplomacy - enthusiastic pursuit of bilateral deals, alongside a lackadaisical approach to multilateral commitments - has many explanations. Some see bilateral agreements as the only practical route to reduce dependence on China. Others argue that multilateralism no longer merits scarce negotiating time and political capital. A third view is that new initiatives face less resistance from domestic interest groups than long-running legacy issues, making neglect of the latter the path of least resistance.

These explanations aren't convincing. India has stayed out of Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), even though China is not a member. Multilateral institutions may have weakened, but India needs to remain at the table as new forms of cooperation are debated.

Finally, India has undertaken commitments on many of the legacy issues in bilateral agreements - and championed similar principles during its G20 presidency - while continuing to oppose them at the multilateral level. That leaves the uncomfortable truth that India's contradictory policy stance may largely be the product of bureaucratic inertia and procedural orthodoxy.

For decades, India has challenged the legitimacy of joint statement initiatives (JSIs) - the route through which initiatives like investment facilitation and MSME Informal Working Group emerged - on the grounds that plurilateral agreements are technically inconsistent with WTO's multilateral decision-making framework. But as facts have changed and India's economy has transformed, bureaucrats and many policymakers have found it difficult to change course.

India's split personality in trade diplomacy has come at a significant reputational cost. A recent commentary by Singapore's Institute of South Asian Studies (ISAS), National University of Singapore, captured the problem satirically by asking AI to explain 'why India routinely says no to new proposals at the WTO' - as though India's position had become too baffling for humans to decipher.

So, what should GoI do? It should separate legacy positions from new negotiating priorities and subject the former to a simple test: do they still serve India's national interest in an economy that has changed beyond recognition? Where the answer is no, trade negotiators should be empowered to change course.

Rather than leaving the matter entirely to the bureaucracy, a more credible approach would be to appoint an independent committee of experts to review India's legacy positions and determine where continuity remains justified, and where it has become a liability.