Content

• Back on track
• Neither Surrender nor Triumph, Trade Pacts Mark India’s Growth as Negotiator

Back on track

Historical & Civilisational Context

Diaspora and Cultural Linkages

• India–Malaysia ties originate from Chola maritime contacts (11th century) and British-era migration; today ~2.9 million Persons of Indian Origin (≈7–8% of Malaysia’s population) anchor cultural diplomacy, remittances, and business networks.

Policy Continuity

• Malaysia has been a consistent partner since Look East Policy (1991) and Act East Policy (2014), supporting India’s sustained integration with ASEAN-led regional architecture and Southeast Asian supply chains.

Relevance

GS II (International Relations)

• Covers Act East Policy, ASEAN centrality, Indo-Pacific strategy, counter-terrorism cooperation, and maritime diplomacy in Strait of Malacca — core IR syllabus areas.

Practice Question

• “Diaspora diplomacy has become a strategic asset in India’s foreign policy.” Examine in context of India–Malaysia relations. (250 Words)

Geostrategic Importance

Strait of Malacca Significance

• Malaysia borders the Strait of Malacca, a chokepoint carrying ~25% of global trade and majority of East Asia-bound energy shipments, making bilateral cooperation vital for SLOC security and anti-piracy coordination.

Indo-Pacific Convergence

• Both countries endorse a Free, Open, Inclusive Indo-Pacific, ASEAN centrality, and UNCLOS-based maritime order, aligning with India’s SAGAR doctrine (2015) and Malaysia’s interest in stable sea-lane governance.

Political–Diplomatic Dimension

Diplomatic Reset

• PM Modi’s 24-hour Kuala Lumpur visit after postponing a 2025 trip signals political intent to stabilise ties despite friction over Malaysia’s calls for “dialogue and de-escalation” on India–Pakistan issues.

Counter-Terrorism Alignment

• Joint statement condemning “terrorism including cross-border terrorism” marks convergence; cooperation spans intelligence sharing, UN coordination, and FATF frameworks to curb terror financing and safe havens.

Economic & Trade Relations

Bilateral Trade Profile

• Bilateral trade ~USD 19–20 billion annually; India imports palm oil, LNG, electronics, while exporting petroleum products, pharmaceuticals, machinery, positioning Malaysia among India’s top ASEAN trade partners.

AITIGA Review Stakes

• Review of ASEAN–India Trade in Goods Agreement (2010) focuses on rules of origin, non-tariff barriers, and trade deficits, as India seeks to prevent rerouting of Chinese goods via ASEAN.

Technology & Emerging Sectors

Semiconductor Cooperation

• MoU linking IIT Madras Global and Advanced Semiconductor Academy of Malaysia supports India’s USD 10 billion Semicon India Programme, aiming at design collaboration, skill development, and supply-chain diversification.

Digital & Energy Collaboration

• Cooperation in digital economy, fintech, and energy transition leverages India’s Digital Public Infrastructure (UPI, Aadhaar stack) and Malaysia’s electronics manufacturing ecosystem for mutually beneficial innovation.

Multilateral & Regional Diplomacy

ASEAN Signalling

• Visit reassures ASEAN after India skipped a summit; Malaysia matters as a founding ASEAN member (1967) and voice in consensus-based regional diplomacy affecting Indo-Pacific stability.

BRICS Interface

• India “noting” Malaysia’s BRICS membership aspirations reflects cautious diplomacy; Malaysia is a BRICS partner country, while Indonesia’s entry increases ASEAN presence in BRICS.

Challenges & Frictions

Political Sensitivities

• Malaysia’s past remarks on Kashmir, Pakistan mediation offers, and hosting Pakistan PM (2025) created trust deficits, showing domestic politics can influence bilateral atmospherics.

Irritants in Legal–Security Domain

• Continued presence of Zakir Naik, wanted under UAPA in India, remains a sensitive issue, though both sides avoided public confrontation to protect broader strategic ties.

Way Forward

Strategic Deepening

• Institutionalising cooperation in maritime security, counter-terrorism, semiconductors, and cyber security can shift ties from personality-driven diplomacy to stable, sectoral partnerships.

Economic Consolidation

• Fast-tracking AITIGA review, supply-chain integration, and MSME partnerships can reduce trade imbalances and anchor ties in long-term economic interdependence within Indo-Pacific value chains.

Neither Surrender nor Triumph, Trade Pacts Mark India’s Growth as Negotiator

Structural Shift in India’s Trade Strategy

From Protectionism to Calibrated Liberalisation

• India moved from pre-1991 import substitution and 150%+ peak tariffs to calibrated FTAs, using trade agreements to secure market access, technology inflows, and value-chain integration while retaining policy space.

Trade as Geoeconomic Statecraft

• Trade policy now serves strategic objectives where tariffs, standards, and supply chains influence power equations; economic agreements increasingly complement diplomacy, security partnerships, and technology alliances.

Relevance

GS II (International Relations)

• FTAs, WTO negotiations, and geoeconomic diplomacy show how trade policy intersects with foreign policy and strategic autonomy.

GS III (Economy)

• Direct relevance to FTAs, tariff policy, non-tariff barriers (SPS, TBT, CBAM), export competitiveness, and supply-chain integration.

Practice Question

• “India’s trade policy has shifted from protectionism to pragmatic liberalisation.” Critically examine. (250 Words)

Core Drivers of India’s Negotiating Behaviour

Strategic Autonomy

• India’s FTA stance reflects strategic autonomy, seen in continued discounted Russian oil imports post-2022, prioritising energy security, inflation control, and fiscal stability over geopolitical pressure.

Domestic Growth Imperative

• Aspiration to reach USD 5 trillion GDP pushes India to secure FTAs for FDI, export markets, and technology transfer, while shielding agriculture, dairy, and MSMEs from import shocks.

India’s Negotiation Leverage

Market Power

• With 1.4+ billion population and a rapidly expanding middle class, India offers one of the world’s largest demand markets, strengthening bargaining capacity in tariff schedules and services negotiations.

Reciprocity Over Concessions

• Earlier vulnerabilities during U.S. GSP withdrawal (2019) and tariff disputes shaped learning; current negotiations emphasise reciprocity, safeguards, and phased liberalisation instead of unilateral concessions.

Logic of Recent Trade Pacts

Diversified FTA Portfolio

• India signed UAE CEPA (2022), Australia ECTA (2022), and concluded India–EU FTA (2026) ,reducing overdependence and building multi-market export resilience.

Beyond Tariffs

• New-age FTAs cover digital trade, IP rights, clean energy, and services mobility, integrating India into high-value technology and knowledge supply chains beyond traditional goods trade.

Developmental Trade-offs

Sectoral Sensitivities

• India protects dairy, agriculture, and MSMEs due to livelihood concerns; sudden liberalisation risks import surges, rural distress, and deindustrialisation without competitiveness buffers.

Standards as Barriers

• Rising non-tariff measures—SPS, TBT, and carbon standards like EU CBAM—increasingly determine trade outcomes, making regulatory alignment and domestic capacity crucial.

Geopolitical Dimensions

Multi-Alignment

• India simultaneously advances FTAs with EU, UK, Gulf, and Indo-Pacific partners, aligning trade with strategic groupings like Quad and IPEF without entering rigid blocs.

Global South Positioning

• India champions policy space for developing nations in WTO debates on agricultural subsidies and public stockholding, projecting itself as a voice of the Global South.

Way Forward

Data-Driven Negotiations

• Stronger trade analytics, sectoral modelling, and stakeholder consultations can align FTAs with industrial policy, PLI schemes, and export competitiveness goals.

Domestic Competitiveness First

• FTAs yield gains only with logistics reforms, skilling, infrastructure upgrades, and regulatory predictability, ensuring Indian firms compete globally rather than depend on tariff protection.