States have become pro-active stakeholders in India’s economic diplomacy. The economic reforms of 1991, growing importance and stature of certain regional leaders as well as growing attention of the outside world towards India’s state capitals are some of the key factors for the same. Initially, a few states had taken the lead in state intervention in foreign policy – referred to as para-diplomacy. Several policies introduced by the central government to encourage state participation in India’s economic outreach have resulted in more states emerging as pro-active stakeholders.

Maharashtra’s role in Para-Diplomacy

Maharashtra is one of the front runners in para-diplomacy for several reasons: it’s geographical location, being home to India’s financial capital Mumbai and a reasonably business friendly eco-system. The western Indian state is an important engine of India’s growth, and thus its role in economic diplomacy is multi-dimensional and involves influencing trade negotiations, foreign investment, and global relations.

Mumbai is home to the Reserve Bank of India, the Bombay Stock Exchange, the National Stock Exchange and the headquarters of major Indian based firms, Reliance, Tatas and Mahindra.

Maharashtra is truly an economic powerhouse in India It has a nearly 15 per cent share in the India GDP. In 2024-2025, Maharashtra received $19.6 billion in FDI. This accounted for nearly 1/3rd of the total FDI, India received during this period. In terms of merchandise exports, Maharashtra’s exports were estimated at well over Rs. 5 Lakh crores (over 15% of India’s total exports).

Some of the important steps Maharashtra has taken to promote its reputation as a business-friendly destination include state-level programs such as the Magnetic Maharashtra and the Maharashtra Industrial Policy. Such summits witness participation of world business leaders, diplomats and policymakers and allows the state to highlight its economic strengths.

Several countries have presence in Maharashtra. Some of the countries which have shown interest in recent years are Germany, Japan and South Korea whose leaders have taken great interest in establishing manufacturing centres in Maharashtra. The Pune industrial belt has drawn car manufacturers the world over, including Volkswagen, Mercedes-Benz, and General Motors. It is often referred to as the ‘Detroit of India’. Such alliances not only enhance domestic employment in India but also enhance India strategic economic alliances with developed nations.

The presence of two major ports—Jawaharlal Nehru Port (Nhava Sheva) and Mumbai Port—further enhances Maharashtra’s global connectivity. Nhava Sheva alone handles around 55% of India’s containerized cargo, making the state indispensable to India’s global trade diplomacy.

How Maharashtra’s location helps

Vadhvan Port is in the works as India’s second deep-draft trans-shipment port (the first being Vizhinjam) and is designed to accommodate mega vessels (those over 20,000 TEU) while providing direct access to global shipping routes. This initiative is a key part of India’s Sagarmala project and the Maritime India Vision 2030. DP World from Dubai, Singapore's PSA, Switzerland's MSC, and TIL, which is the terminal arm of Mediterranean Shipping, are making investments for a few key reasons: Free Trade Agreements (FTAs) ensure steady, long-term trade flows. They all are aiming to tap into India's cargo market right at the source, instead of having to route it through places like Colombo or Dubai.

By owning stakes in Indian ports, they can maintain control over supply chains and help position India as a future logistics hub in the region. In short, FTAs generate the demand, ports provide the necessary capacity, and global players bring in the capital and efficiency needed.

Amidst the array of FTAs signed by India with UAE, Australia, UK, EFTA etc- many global shipping lines and logistics companies such as the DP World, PSA, MSC and TIL have pledged to increase their investments in the JNPT port and the upcoming Vadhvan port which will be India’s second trans-shipment port. The strategic link between FTAs and port investments provides a key insight on the crux of Maharashtra’s economic diplomacy overseas whereby Right now, about 75% of India’s container cargo is being trans-shipped through foreign hubs like Colombo, Singapore, or Dubai (Jebel Ali). With more Free Trade Agreements (FTAs) on the horizon, cargo volumes are expected to increase, which means India could end up shelling out more for foreign trans-shipment costs unless it establishes its own hubs.

The India–UAE Free Trade Agreement (CEPA), which kicked off on May 1, 2022, is set to boost bilateral trade from USD 60 billion to an impressive USD 100 billion over the next five years. Exports from Maharashtra, particularly in textiles, electronics, and engineering goods, have seen significant gains, thanks to over USD 35 billion in trade and investment flowing in from UAE firms, which is really helping to drive the state's economic growth.

Expanding Opportunities For Collaboration

At the UAE–India: Partnership for Enduring Prosperity event held in Ras Al Khaimah on January 31, 2025, the UAE–India Business Council (UAE Chapter) and Maharashtra’s Industrial Development Corporation (MIDC) signed a Memorandum of Understanding (MoU). This agreement, which was attended by notable figures like Uday Samant, Maharashtra industries minister, aims to streamline business processes for UAE investors, promote annual business delegations, and enhance investment opportunities in Maharashtra across various sectors, including manufacturing, tourism, and hospitality. The port officials of Jebel Ali and Abu Dhabi ports have also conducted several visits to the JNPT port of Mumbai during and post the FTA negotiations between India and UAE.

The Economic Cooperation and Trade Agreement (ECTA) between India and Australia, which kicked off in late 2022, has already seen bilateral trade soar from USD 10.7 billion in 2020 to an impressive USD 22.4 billion in 2024. During a business session co-hosted by the Australian Consulate General in Mumbai, Vice Consul Yann Sinclair and Rupa Naik from the World Trade Centre Mumbai highlighted the positive momentum generated by ECTA. They emphasized the need for deeper engagement at the state level to tap into even more trade and investment opportunities. Notably, Jodi McKay from the Australia–India Business Council has pointed out that Indian states, including Maharashtra, should take a more active role in utilizing ECTA to reach ambitious trade and investment targets.

The India–UK Comprehensive Economic and Trade Agreement (CETA) was finalized in May 2025. The agreement eliminates tariffs on 99 % of Indian exports to the UK, while the UK commits to a phased reduction reaching 90 % tariff-free within a decade Maharashtra’s Chief Minister, Devendra Fadnavis, highlighted the state’s strong upside from the FTA in a social media post (July 24, 2025). He noted that farmers (mangoes, grapes, millets), artisans, MSMEs and the service sector stand to gain immensely from tariff-free access and smoother trade ties Though specific MoUs or institutional partnerships between Maharashtra and UK bodies are not documented here, Maharashtra already demonstrates strong support for and engagement with the deal’s potential gains.

Need To Address Policy Bottlenecks

Despite being an important engine of the country’s growth, Maharashtra has not been able to realise its full potential. To fortify its position as a beneficiary of economic diplomacy, Maharashtra has to address key several policy issues,  especially pertaining to infrastructural bottlenecks. It also needs to proactively engage with other stakeholders to benefit from India’s FTAs with other countries.

(The lead author is a policy analyst associated with The OP Jindal Global University, Sonipat, India. Sarva Chakrabarti is a first year MBA student at Symbiosis International University, Pune. Views expressed are personal. They can be reached at tsmaini@jgu.edu.in )