As India seals its trade pact with New Zealand, after concluding similar deals with Australia and the United Kingdom earlier, and is advancing talks with the United States and Canada, a Five Eyes-aligned trade architecture is coming into being to replace the plurilateralism that New Delhi rejected in the Regional Comprehensive Economic Partnership (RCEP).
The free trade agreement (FTA) was signed on April 27 in New Delhi by Union commerce minister Piyush Goyal and New Zealand’s trade and investment minister Todd McClay. It marked the culmination of negotiations that had started in 2010, got stalled, restarted and hardened over the years, and were revived again in 2025. What began as a conventional market access negotiation had, over the years, turned into a test of non-negotiables, especially dairy, agriculture and labour mobility.
The final agreement reflects those fault lines as much as it resolves them, yet this is seen as a new chapter in bilateral ties. “This is a comprehensive and forward-looking agreement that will open new avenues for businesses and professionals,” Goyal said at the signing.
But beyond the April 27 ceremony lies a deeper shift, for this is a signal of how India intends to engage with the global trading system. That shift is visible in both data and direction. India’s annual trade with Australia has crossed $31 billion while with the United Kingdom it is about $20 billion, with an ambition to scale it up to $100 billion by 2030. Trade with New Zealand, currently around $1.3 billion, is expected to expand sharply post-FTA. The United States remains India’s largest trading partner at over $190 billion whereas trade with Canada is in the $8-10 billion range.
At one level, this looks like India inching towards a Five Eyes-aligned trade corridor. But this will be no easy substitute to large plurilateral frameworks. These are advanced, high-standard economies where average tariffs are already low, often below 3-4 per cent. The real negotiations shift to non-tariff barriers, regulatory standards, digital trade and labour rules. Market access here is harder to secure and more conditional.
The scale is also different. The RCEP spans 15 economies, nearly 30 per cent of global GDP and trade, and over 2.3 billion people. India’s bilateral route, by contrast, involves negotiating multiple agreements, each with its own rulebook. It is a more complex and resource-intensive pathway.
Yet India’s strategy is not a simple pivot away from Asia. Even as it deepens ties with the Five Eyes economies, it has expanded engagement with RCEP countries, minus China. The deal with Australia is operational. The pact with New Zealand is now concluded. India is also renegotiating its FTAs with Japan, South Korea and ASEAN (Association of Southeast Asian Nations) while exploring more targeted bilateral arrangements within Southeast Asia. The intent is recalibration.
It is only in this broader context that India’s decision to walk away from RCEP in 2019 begins to look less like an exit and more like a pivot. For years, the argument from India’s pro-trade lobby was straightforward. Join RCEP and India would integrate into a frictionless Asian production network. Tariffs would fall, supply chains would deepen, and Indian firms would gain access to a seamless manufacturing ecosystem spanning ASEAN and East Asia.
That argument was economically coherent. It was also anchored in a phase of globalisation that is now under strain. The pro-RCEP lobby was right about one thing. Frictionless movement of goods enhances efficiency. A unified rulebook reduces transaction costs and enables deeper supply-chain integration. But that logic assumes a stable geopolitical environment and, critically, a neutral centre of gravity within the trading system.
In the case of RCEP, that assumption was always contestable. The architecture of the bloc effectively positioned China at its core. China accounts for close to 30 per cent of Asia’s manufacturing output and is the largest trading partner for most RCEP members. A tariff-light, rules-aligned framework would have further entrenched its role as the principal hub in regional supply chains.
For India, this raised a structural concern. Integration into RCEP would not have meant joining a neutral network, but entering a system where value chains, intermediate goods and final demand were heavily anchored in China. The likely outcome was deeper dependence, not diversification. Lower tariffs could have accelerated imports, widening an already significant $50-60 billion trade deficit with China and constraining domestic manufacturing.
There was also a second-order effect. RCEP’s rules of origin, designed to enable seamless trade, would have allowed Chinese components to move through third countries and enter India with preferential access. This would have blurred supply-chain boundaries and amplified China’s indirect access to the Indian market. In effect, the efficiency gains promised by RCEP would have come with a consolidation of Chinese economic dominance in the region.
It is this trade-off that India ultimately chose to avoid. The world since then has changed. The Covid pandemic exposed the fragility of hyper-optimised supply chains. The US-China trade conflict sharpened economic rivalries. The Russia-Ukraine war disrupted commodity flows and logistics networks. Global value chains have not disappeared, but they are being reconfigured. Efficiency is no longer the sole organising principle. Resilience, redundancy and trust now shape decision-making.
In this environment, economic interdependence itself is being recalibrated. Countries are seeking to diversify supply chains, reduce exposure to single markets and align trade relationships with broader strategic interests. The shift is towards managed globalisation. India’s approach reflects this transition. Instead of joining the world’s largest supply chain, it is building multiple, selectively integrated corridors, prioritising control and negotiating reciprocity on its own terms.
The India-New Zealand FTA captures this shift in microcosm. India has secured zero tariff access on 100 per cent of its exports while offering phased tariff reductions on about 95 per cent of New Zealand’s exports, excluding dairy and other sensitive sectors. It has also secured 5,000 annual work visas, 1,000 working holiday visas and anchored a $20 billion investment commitment over 15 years.
While being a template of calibrated openness, it has trade-offs. Staying out of RCEP means missing out on certain supply-chain efficiencies and intra-Asia integration gains. Indian firms may face higher barriers in markets where competitors benefit from preferential access.
But India appears to have made a conscious choice. It is willing to trade some efficiency for greater strategic autonomy. It is betting that the future of global trade will be less about seamless integration and more about calibrated partnerships. RCEP represented the high point of hyper-globalisation. India’s new trade strategy represents what comes after.
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