External trade resilience, political risk and development buffers: India and strategic comparator economies in a fragmenting world economy
Vijay Agrawal, Amit KumarPurpose
This study examines how India is positioned within the changing international trade-politics-development landscape created by geoeconomic fragmentation, energy-market uncertainty and supply-chain realignment. Rather than treating India's trade deficit as a domestic accounting issue, the study develops a cross-country trade-resilience perspective that compares India with advanced deficit economies, manufacturing-surplus economies, export-platform economies, commodity-diversified economies and energy-surplus economies.
Design/methodology/approach
The study uses a quality-checked annual panel of 15 strategic economies. In response to the measurement concerns, the revised design distinguishes trade-balance performance from resilience capacity. The current account is excluded from the core resilience index and primary panel specification because of accounting overlap with the trade balance. A PCA-weighted Trade Resilience Capacity Index (PCA-TRCI) is constructed from reserve adequacy, commercial-service exports, high-technology exports, fuel security and GDP growth. The analysis additionally examines annual trade-balance instability, three-year volatility and one-year recovery after adverse movements and introduces country-specific political instability alongside the common global geopolitical-risk measure.
Findings
In the primary fixed-effects model excluding the current account, global geopolitical risk is negatively associated with trade-balance performance (coefficient −3.530; p = 0.017), while commercial-service exports are positive and fuel-import dependence is negative at the 10% level. Country-specific political instability is not independently significant. High-technology export intensity is associated with lower annual trade-balance instability and lower three-year volatility at borderline conventional levels. PCA diagnostics support the five-indicator capacity index (KMO = 0.669; Bartlett p < 0.001), with two retained components explaining 56.69% of total variance. India ranks third among the 13 economies with complete 2024-component data and shows a marked improvement in capacity during 2023–2024.
Research limitations/implications
The study is limited by the relatively small cross-sectional dimension of the panel and the availability of some variables only through 2024. The Trade Resilience Index is a study-specific construct and should be interpreted as an exploratory comparative measure rather than a universal benchmark. Future research may extend the country coverage, incorporate firm-level evidence and investigate sector-specific resilience channels. Despite these limitations, this study provides a reproducible framework for evaluating external-sector resilience under conditions of geopolitical and economic fragmentation.
Practical implications
The results suggest that India's trade-policy challenge is not mechanical import compression but resilience-building: services-export deepening, reserve credibility, energy diversification, export sophistication, logistics upgrading and strategic market access. The findings are directly relevant to emerging economies facing supply-chain restructuring, energy-route risk and shifting trade blocs.
Social implications
Improved trade resilience contributes to macroeconomic stability, employment generation and sustainable economic development. A resilient external sector helps reduce vulnerability to international crises, supports income growth and strengthens economic security. For developing economies, resilience-enhancing policies can promote inclusive growth by supporting export-oriented industries, expanding opportunities in high-value services and reducing exposure to volatile commodity markets. Stronger resilience also improves the capacity of governments to maintain social welfare and development objectives during periods of global uncertainty.
Originality/value
The paper retains its comparative trade-politics-development focus but strengthens its contribution by separating trade-balance performance, resilience capacity, external sustainability and political risk. The revised PCA-based index excludes current-account overlap, reports annual rankings for 2010–2024 and tests alternative resilience outcomes rather than relying on the contemporaneous trade-balance level alone.