India and WTO: Navigating Global Trade Challenges

When India signed up to the World Trade Organization in 1995, it tied its economic future to a set of rules written largely by the world’s wealthiest nations. Three decades later, that decision still shapes everything from the price farmers receive for their wheat to whether a smartphone is assembled in Noida or Shenzhen. India was not a reluctant latecomer to this system. It was a founding member of both the WTO and its predecessor, the General Agreement on Tariffs and Trade (GATT). Understanding how India has worked within, pushed against, and sometimes outright blocked this global trade body tells us a great deal about how a developing economy protects its interests in a world of unequal players.

From GATT to the WTO: how India entered global trade 🔗

India’s engagement with the multilateral trading system began at the very start. It was one of the 23 original contracting parties to GATT, which came into effect in 1948 and which India joined as a founding member. GATT was a provisional arrangement focused almost entirely on reducing tariffs on goods. It worked through negotiation “rounds,” each one chipping away at trade barriers between member countries.

The most ambitious of these was the Uruguay Round, which ran from 1986 to 1994. It produced the Marrakesh Agreement and created a permanent institution to replace the patchwork GATT system. On 1 January 1995, the WTO formally came into being, and India was an active founding member from the very start. The shift was significant. Where GATT dealt mainly with goods, the WTO expanded the rulebook to cover services, intellectual property, and investment measures, and it came with a binding dispute settlement system that made trade commitments genuinely enforceable.

A shift from protectionism to openness 🔗

Before the 1990s, India ran a largely closed economy. High tariffs, import licensing, and quantitative restrictions protected domestic industry from foreign competition. WTO membership, combined with the 1991 economic reforms, forced a different approach. The change in tariffs alone tells the story: India brought its average tariff rates down from over 80% in the early 1990s to a fraction of that today. As part of the Uruguay Round commitments, India also bound 67% of its tariff lines and made services commitments in 33 activities, well above the developing-country average.

What India gained from WTO membership 🔗

For a developing country, opening up to global trade is a calculated gamble. India’s bet produced real benefits, though they came with strings attached.

Expanded markets and rising exports 🔗

The most direct gain was access to global markets under a predictable, rules-based system. The WTO’s framework gave Indian exporters more stability and protection against arbitrary trade barriers in other countries. Membership helped India expand its export markets and boosted foreign direct investment into the economy. Sectors where India holds genuine advantages, particularly software services and pharmaceuticals, found new opportunities under the expanded WTO rules covering services and intellectual property.

Foreign capital and a more transparent regime 🔗

WTO membership signalled to global investors that India was committed to a transparent and predictable trade regime. This mattered for attracting foreign capital. The discipline of binding commitments also pushed domestic reforms forward, encouraging efficiency and integration into global supply chains. Indian exporters have increasingly used trade agreements to claim duty concessions, with authorities issuing over 720,000 certificates of origin in FY 2024-25, up from the previous year, a sign of growing engagement with preferential trade.

The costs: domestic industry and employment 🔗

Liberalisation is rarely painless. The same openness that boosted exports also exposed Indian producers to fierce foreign competition, and not every sector survived the encounter.

Pressure on small producers 🔗

When cheaper imported goods entered the market, many domestic industries, especially smaller and less efficient units, struggled to compete. This is a recurring theme in India’s trade story. Even with bilateral trade deals, Commerce Minister Piyush Goyal noted in 2024 that some existing agreements have hurt local industries, prompting a reassessment to protect small businesses and farmers. Agriculture, in particular, remains a sensitive sector that India tends to guard heavily or exclude from negotiations.

The employment question 🔗

The link between trade liberalisation and jobs is the other major concern. When domestic firms shut down or shrink under import pressure, workers lose their livelihoods. For an economy that needs to generate millions of jobs every year, this is not a small matter. The challenge is structural: India’s economy has historically been driven more by domestic consumption than by exports, which has made it cautious about throwing its markets wide open.

Agriculture: India’s biggest fight at the WTO 🔗

No issue captures India’s tension with the WTO better than agriculture. The dispute centres on food security, farmer welfare, and a rulebook that India argues is rigged in favour of rich countries.

The public stockholding problem 🔗

India runs a Minimum Support Price (MSP) system, under which the government buys crops like rice and wheat from farmers at a guaranteed floor price, stores them, and distributes them cheaply to the poor. This public stockholding programme is the backbone of India’s food security and supports hundreds of millions of people. The trouble lies in how the WTO measures it.

Under the Agreement on Agriculture, trade-distorting support is calculated against an external reference price based on 1986-88 prices that are now roughly four decades old. Because that benchmark ignores decades of inflation, India’s perfectly reasonable support to its farmers appears to breach WTO subsidy limits. Current rules cap a country’s food subsidy at 10% of the value of production, calculated using those outdated 1986-88 prices.

The charge of double standards 🔗

India’s frustration deepens when it looks at what wealthy nations themselves do. India argues that developed countries, particularly the US, dump agricultural surpluses on global markets at prices below production cost while demanding more restrictive measures from poorer nations. India contends that total subsidies given by the US and the European Union far exceed those it offers its own farmers.

To manage this, the 2013 Bali Ministerial Conference produced a “peace clause.” This was an interim solution to avoid disputes over public stockholding programmes even when countries exceeded their subsidy limits, with a promise to find a permanent fix. India has invoked this clause more than once to protect its rice procurement, and at the 13th Ministerial Conference in 2024 it reiterated its “right to food” and pressed for public stockholding as a permanent solution. A durable settlement still does not exist.

Leading the developing world 🔗

India has not fought these battles alone. It has built and led coalitions of developing countries, working through groups like the G33 and G20 to pool negotiating strength. India’s stand on public stockholding is backed by the G33, a group of 47 developing and least developed countries. This coalition-building has transformed India from a relatively quiet GATT-era member into one of the most outspoken defenders of developing country interests and a self-styled leader of the Global South.

A WTO in crisis 🔗

While India presses its case, the WTO itself is in serious trouble. Its most powerful feature, the system that made it different from toothless GATT, has been quietly disabled.

The paralysed dispute settlement system 🔗

The WTO settles disputes in two stages. A panel hears a case first, and its ruling can be appealed to the Appellate Body, often called the crown jewel of the system. That body needs at least three members to function. The problem is that the United States has blocked new appointments to the Appellate Body since 2016, meaning members lose the right to appeal until it is reconstituted. By December 2019, the Appellate Body had run out of judges entirely and ceased operating, having been paralysed by the US blocking all judicial appointments.

The consequence is a loophole that defeats the entire purpose of the system. Because an unheard appeal means a panel ruling is never adopted, a country that loses a case can simply appeal “into the void” created by the defunct Appellate Body, preventing the ruling from ever taking effect. Enforcement has, in effect, broken down.

US protectionism at the root 🔗

The crisis reflects a deeper US shift. Washington was the chief architect of this system, yet successive administrations have moved from being its strongest defender to its leading critic. The US has justified its blockade with complaints over judicial activism at the WTO and concerns over US sovereignty. Despite repeated petitions from roughly 130 members urging it to relent, the US has refused. While the Trump administration brought matters to a head, analysts note that the roots of the crisis reach back across several administrations over the past two decades. For India, which relies on a functioning rules-based system to challenge unfair trade practices, a WTO without enforcement teeth is a serious problem.

India’s forward strategy: regional trade and a manufacturing push 🔗

Faced with a stalled WTO, India has not waited around. It is pursuing a twin strategy of deepening regional trade ties and building itself into a global manufacturing hub.

Expanding regional and bilateral trade 🔗

India has been actively negotiating and signing free trade agreements to diversify its partnerships and reduce reliance on any single market. Recent and ongoing deals include the India-UAE CEPA, the India-Australia ECTA, and negotiations with the UK and the European Union. Geopolitical shifts, including US-China tensions, have pushed India toward regional supply chains and away from over-reliance on any single market. This regional turn is partly a hedge against the uncertainty of the multilateral system.

Becoming a manufacturing hub 🔗

The centrepiece of India’s domestic strategy is the Production Linked Incentive (PLI) scheme, which offers companies financial incentives tied to incremental sales of goods manufactured in India. The aim is to boost local production, attract investment, and reduce import dependence under the banner of Aatmanirbhar Bharat, or self-reliant India. The numbers show traction: by November 2024, the scheme had attracted committed investments of ₹1.61 lakh crore and generated over 12 lakh direct and indirect jobs across sectors like electronics, pharmaceuticals, and textiles.

India is positioning itself to compete with manufacturing powerhouses like China and Vietnam, particularly in electronics, where global giants now assemble products on Indian soil. To support exporters, the government has also rolled out new initiatives, including the Export Promotion Mission, approved in November 2025 with a budget of ₹25,060 crore over six years to help MSMEs access global markets. The strategy is clear: if the multilateral system cannot deliver, India will build its trading future through targeted industrial policy and regional partnerships.

Weighing three decades of WTO membership 🔗

India’s experience with the WTO is genuinely multifaceted. The membership opened markets, attracted capital, and gave India a powerful voice in shaping global trade rules, especially as a champion for developing nations on food security. At the same time, it exposed vulnerable industries to competition, raised difficult questions about jobs, and locked India into a framework that India itself believes is structurally tilted toward rich countries. The current paralysis of the WTO’s enforcement system only adds to the uncertainty, validating India’s long-held caution while pushing it toward regional deals and self-reliance. The story is far from over, and how India balances global integration with domestic protection will define its economic trajectory for years to come.

What do you think? Should India keep investing its diplomatic energy in reforming a stalled WTO, or focus its efforts on regional trade agreements and domestic manufacturing instead? And when food security for hundreds of millions clashes with global trade rules, where should the line be drawn?

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