External trade resilience, political risk and development buffers: India and strategic comparator economies in a fragmenting world economy

Abstract

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. 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. 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. 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. 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. 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. 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.