India is likely to gain from the ongoing trade and tariff related turmoil in the global economy and is likely to come stronger rather than weaker, said Arvind Panagariya, Chairman of the 16th Finance Commission.

Addressing the first Annual Growth Conference 2025 of the Isaac Centre for Public Policy (ICPP) at Ashoka University on May 2, Panagariya expressed optimism about India’s prospects and noted that the US wants to decouple from China and said that he expects the US-China conflict to stay. The US is also likely to restrict import of Chinese goods through countries like Vietnam and Cambodia either by higher tariffs or rules of origin norms, which will be higher than those on India.

“India itself, if it actually successfully negotiates a trade agreement with the United States, which I think also will open the rider to having an agreement with the European Union, and that places, India, globally, trading equation incredibly favourably,” Panagariya underscored.

India would then be placed favourably in such a China Plus One scenario, he said, adding that more investments in manufacturing may also take place then along with other domestic reforms.

“So even in manufacturing, we may then see a little better progress. If that begins to build up, some of the outstanding reforms that have been tougher, any pressure for those reforms will grow, and we may begin to then see those reforms happening, particularly both with respect to labour markets and land markets,” he said.

Panagariya also underlined the importance of free trade and said the role of trade is absolutely critical. India has plenty of opportunities in the global economy with a share of 2% in goods and 4% in the services sector. “The opportunity for India is there if we are able to forge an agreement — the bilateral agreement with the United States, and then with European Union and the UK, then we already have some of the other agreements. And also we are very close to free trade, actually, if we do that,” he said.

His comments come at a time when India is working to close the first tranche of a bilateral trade deal with the US by September October this year and is also accelerating negotiations with the EU with an eye to finalise it by the end of this year. It is also engaged in negotiations with the UK to wrap up the free trade deal.