Representative image. | India Shipping News.
With India on a definitive high-growth pathway that will bring positive gains for global growth, the country must set its sights on emerging as an economic alternative of choice for other nations, both advanced and developing, and nurture trends that will position it as a reliable and credible partner economy. An economic security doctrine could help shape its future external economic engagement optimally and go a long way towards this objective.
Introduction
Over the last year, a series of strategic curbs on critical global economic flows, including trade, investment and technology, underscored the heightened vulnerability of international economic relations. At the current juncture of ‘turbulent times’ and ‘extraordinary changes’, the international economy is experiencing at an accelerated pace, the developing world is forced to confront a highly unstable economic environment, eyeing announcements and counter-announcements from the two dominant economies, much like spectators at a tennis match.
For India, the future of the international economic environment and its bilateral commercial engagements represent an existential conundrum with the potential to negatively impact its path to development and its aspirations for emerging as an economic powerhouse.
As the tides of global economic uncertainties wax and wane in years ahead as they must, India must develop a toolkit of strategy options that will de-risk its growth strategy and clearly guide its responses to evolving external situations.
While faster economic growth and domestic actions would anchor India’s economic security, balancing and managing external economic volatilities necessitates a separate carve-out under the umbrella of strategic autonomy.
Such a foreign economic policy, or national economic security doctrine, can be developed through a dedicated and institutionalised council that would draft strategies for conducting bilateral, plurilateral and multilateral economic engagement based on evidence and data. This would greatly help businesses leverage external opportunities as they currently operate in a vacuum where risks are magnified due to uncertainties in national policy response.
Recent Economic Security Documents
In recent months, several countries and groupings have presented national or economic security strategies to guide their policies within a rapidly-evolving global economic architecture. The recent US National Security Strategy document elicited high global interest for its pivot towards the Western Hemisphere and stated ‘cultivating American industrial strength must become the highest priority of national economic policy’. On 2 December 2025, the European Commission introduced a Joint Communication on Strengthening Economic Security, building on its 2023 Economic Security Strategy and focusing on addressing high-risk situations. China released a white paper on the country’s national security in the new era in May 2025, ‘reinforcing security in development and pursuing development in security’ among other stated aims. The OECD issued a report ‘Economic Security in a Changing World’ in September 2025, which focuses on risks due to vulnerabilities in international supply chains, energy security, international investment security and cybersecurity, and outlines policy approaches for their mitigation.
As one of the largest economies in the world, India must bring out its own economic security aims and principles in alignment with its overall national security strategy.
India’s Economic Engagement Strategy
An economic security document for India would need to deliberate on several key problem statements:
● How does diplomatic multialignment converge with economic development objectives given the often-opposing political and commercial forces at play?
● How can India strengthen its external influence by deploying economic tools?
● How can it work towards building resilience in its future trade and investment flows and protect its sources of capital from external risks?
● What should be the areas of external cooperation based on its growing economic strengths that would optimise its outward impact and build its overall national security?
● With which countries should it work for developing resource security for its growth?
● What should be the key regions and countries that India should strategically incorporate into its economic engagement approaches keeping in mind that resources are limited?
● With any specific country, and especially with the major economies, what areas of cooperation now and in the future can yield the best outcomes for its progress?
● What domestic economic strengths must it fortify to address future vulnerabilities and potential shocks, including in advanced technologies, emerging sectors, and critical raw materials?
Analytical deliberations on such questions and more can guide future external economic policies, and could be derived from simulation and scenario-planning exercises akin to military policy exercises. In general, a comprehensive and in-depth analysis of India’s economic security in a disruptive global economic environment is a visible gap that must be bridged quickly. A set of guiding frameworks for economic relations can encourage businesses to align their strategies to national priorities.
Political and Economic Relations
A starting point for an Indian economic security doctrine should focus on the interplay of political and economic developments.
For instance, the India-China relationship faces the dichotomies of border management on the one hand and ‘business as usual’ economic interactions on the other. At the meeting with Prime Minister Narendra Modi in August 2025, President Xi Jinping reportedly said that India should not let border issues define their relationship. The two countries have commenced direct flights and calls for relaxing foreign direct investments (FDI) from China under Press Note 3 have increasingly arisen in Indian circles as the two sides dial down the freeze in relations. India-Canada economic engagement was also impacted due to political issues, prompting businesses of both sides to put on hold plans for expanding commercial ties. The question is whether political and economic relations with any country need to be considered together or kept separate, the policy response to which would help guide businesses on their future course of action.
While political relations will invariably affect business sentiments and constrain economic ties, policy directions could provide the signals for the extent of the response. Most adverse bilateral developments that could arise from time to time would need to be examined on a case by case basis; however, a national economic security doctrine can offer some parameters on which decisions on India’s response can be based such as the partner country’s existing trade and investments, presence of diaspora, size of GDP and geographical proximity.
Hedging Dual Asymmetries
In particular, India confronts a twin structural complexity in its relations with the two largest economies, the United States and China, that compound its economic choices and compel an accelerated and comprehensive domestic reform agenda.
With the US, while tariffs, including the threat of 500 per cent rates, are the current headlines, it may be noted that the US has previously taken actions such as sanctions, placing India on its Special 301 IPR watchlist, technology transfer restrictions, and withdrawing Generalised System of Preferences (GSP) benefits, among others. Given its increasingly transactional approach, economy-related demands of the US may require India to consider moderating its technology and market dependence on it while retaining access to investments. In 2024-25, almost a fifth of India’s exports went to the US and 10 per cent of India’s cumulative FDI is sourced directly from that country, with indirect investments adding to it.
A broad range of policy options such as strengthening its IPR regime, expanding exports to other markets, developing leverage in strategically identified products of the future, and building new areas of cooperation with partner countries will need to be analysed to determine the balance of choices and outcomes for greater resilience.
With China, India’s high supply chain dependence is not limited to critical sectors such as electronics, machinery, APIs, solar equipment and electric vehicle components but also extends to low-technology or labour-intensive products such as textiles and clothing, metal products, plastics, and others. Post the Galwan crisis in 2020, the share of imports from China in India’s total imports has risen from 13.7 per cent in 2019-20 to 15.7 per cent in 2024-25, in part due to China consolidating its global manufacturing dominance across sectors.
On the other hand, China has displayed reluctance in importing from India, including in the services sector, and discussions under various platforms over many years have yielded limited gains. Given that China has assiduously built up scale to dominate global trade, India cannot easily decouple from the country and its options for diversification are limited. The softening in relations following the 2024 Kazan and 2025 Tianjin meetings between the leaders of the two countries has led to relaxations, and institutional dialogues, interrupted by the Galwan crisis, must be resumed with a focus on addressing the adverse trade balance and opening the services market in China while leveraging India’s growing market to extract gains. India needs greater clarity on approvals to inward investments from China as well as policies such as imposing Quality Control Orders and raising import duties and their impact on India’s MSME sector and exports.
Representative image. | Livemint.
The nature of India’s dependencies on the US and China differs, encompassing technology, markets and investments on the US side and critical industrial inputs on the Chinese side. Thus, enhancing economic engagement with either while moderating it with the other could damage India’s economic prospects and hamper its resilience.
To balance its engagement with these major economies in light of geopolitical developments, India would need to assess and compare data in relation to other economies. Clarifying possible policy directions and forward scenario planning would help businesses consider their relations with these two economies.
De-risking Inward and Outward Supply Chains
De-risking India’s supply chains, overly dependent on China as a source and the US and EU as markets, hinges on a dual strategy of diversification of import sources and export destinations. Similarly, India’s trade basket needs attention for reducing reliance on certain products and diversification of exports. In particular, India’s presence in top globally traded products of electronics and machinery is low. A detailed mapping of its value chains, both inward and outward, and alternate markets and sources would help to identify key chokepoints as well as emerging and potential weaknesses and opportunities. For instance, India’s exports surged in the post-Covid year, and determining the elasticities of specific products in key countries could identify the products that the country should promote for larger gains.
Some long-term measures are currently being instituted to build domestic resilience in value chains for sectors such as APIs, electronic parts, wafers, semiconductors, among others through global agreements, tax and other incentives, and free trade treaties. An ongoing data exercise leveraging AI could further support such de-risking measures.
Equally, the range of bilateral relations with specific partner countries could be better defined through an assessment of its trade strengths and areas of interest to India. As an example, the trade potential with a partner economy may depend on the size of its GDP, the size of its population as a future market, its level of global trade integration, and other factors. India can strategically develop a matrix combining such parameters to identify certain economies for enhanced trade efforts and undertake dedicated measures such as high-level interactions, free trade agreements and market-building exercises in these countries.
Investment Sources and Destinations
Investments sought from a country could potentially be based on its outward FDI as a proportion of its GDP, the spread of its multinational companies, its financial system, and its natural resources. By examining such indicators, India could prioritise its outreach to the companies of identified partner economies, given that brand-building resources are limited and focused attention is required for select countries. Similarly, attracting FDI will need to be mapped with opportunities in India and investor support provided accordingly.
Certain other indicators could be noted to restrict inward FDI if required by political considerations through measures such as investment scrutiny, ownership limits and other instruments, based on pre-defined criteria for investment risk assessments.
India could also better target its own outward investments to seek markets, acquire technology, build infrastructure, or access natural resources based on partner country strengths, given limited fund availability.
Identifying partner countries for inward and outward investments through data analysis will deliver impactful outcomes as per development priorities.
Indicators help Relations in Different Sectors
Data-based assessments would help in guiding partnerships in sectors beyond trade and investment. Key economic indicators could suggest the optimal mix of sectoral cooperation to be promoted with partner economies. Identifying and tracking specific indicators for sectors would help shape a better matrix of cooperation for businesses.
Access to technology is a central determinant for India’s future economic trajectory and should be prioritised in any economic security strategy. Both directions of technology flows would need to be assessed to determine where India can best source which technologies, and likewise where it can share technologies safely to widen its sphere of economic influence. External partnerships are proving to be vitalin India’s technology quest in semiconductors, electronics, artificial intelligence, drug development and talent development, and expansion of such technology sharing would help build India’s R&D and innovation in sectors that it deems important. At one point, the country was examining how to encourage exports in 3D printing and robotics, however, the focus seems to have shifted. Indicator-based analysis would help continuity in strategies.
In terms of renewable energy and climate change partnerships, guiding indicators could be solar irradiation, wind power potential, technology levels, progress towards international commitments and so on. India has entered into sustainability agreements with many countries and regional organisations. With some countries, it seeks partnerships for its own climate action initiatives through project funding, relevant technologies and capacity building, among others. With others, it aims to bolster sustainability efforts through funding, information-sharing and joint projects.
Indian diaspora in New York sets two Guiness World Records, August 2022. | ANI.
On work mobility, India must consider the increasingly adverse regimes that could impact its services exports and inward remittances, and attempt to protect its growing diaspora. Here, the list of potential factors feeding into policy formulation could include size of diaspora, visa arrangements in place, potential for future mobility, language facility, and an analysis of current political sentiments on migration in destination countries.
In the digital economy, the nature of the relationship would vary depending on the digital prowess of a country across different sectors, skill levels, the threats to cyber security, and transparency.
For development cooperation, India could look at education and health parameters, as it has done in the e-Vidya Bharati and e-Arogya Bharati initiatives with Africa. Indicators would also help select projects for development cooperation based on potential gains for India, such as small business development initiatives, skilling and capacity building, or large infrastructure projects.
Domestic Capabilities can Mitigate External Risks
India must analyse its domestic capabilities to respond to arising situations, identify economic vulnerabilities due to global conditions and institute targeted measures to bridge these gaps. The Production Linked Incentive Scheme and the Critical Minerals Mission represent good examples of domestic initiatives to counter global threats.
However, the larger economic management of the country stands as an imperative on its own and needs a different set of policies on factors of production, ease of doing business, and sectoral encouragement, apart from administrative and judicial reforms, to ensure that India attains its developmental goals. A stronger and larger economy by itself will greatly strengthen India’s strategic economic autonomy, and a national economic security document focusing on its external engagement must be well coordinated with domestic macroeconomic frameworks.
Finally, an overarching economic security statement would need to include mechanisms for future-gazing to identify emerging global threats and opportunities, time-bound implementation of announced plans and projects overseas, monitoring of progress of the goals and advances in India’s global economic presence, and course correction as and when required.
Within a rapidly shifting global economic environment, ongoing modifications and innovative solutions can be baked into a dynamic strategy document at the outset.
Conclusion
In an ideal comprehensive economic security strategy, each partner country would be mapped to India’s diplomatic and economic goals with a proposed set of cooperation areas and roadmaps to implement them over the medium term. This would be helpful to stakeholders in India’s economic domain such as large, medium and small businesses, job seekers, overseas investors and traders. A progressive, future-oriented, and in-depth strategy document could set the foundation for other countries to better define their policies towards India and encourage them to seek new areas of partnership as well.
With India on a definitive high-growth pathway that will bring positive gains for global growth, the country must set its sights on emerging as an economic alternative of choice for other nations, both advanced and developing, and nurture trends that will position it as a reliable and credible partner economy. An economic security doctrine could help shape its future external economic engagement optimally and go a long way towards this objective.
(Exclusive to NatStrat)
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