India’s Trade Performance in FY 2025-26: Moderate Export Growth Amid Shifting Trade Dynamics

India’s export figures hit the US$860.09 billion mark in FY 2025-26, fueled largely by a thriving services industry and a strategic pivot toward new trade partners.

India’s external trade performance in FY 2025-26 reflects steady, albeit moderate, expansion in exports, in the midst of ongoing geopolitical tensions and the US tariff challenge. While services exports continued to underpin overall growth, merchandise trade showed relatively subdued momentum, highlighting structural shifts in global demand and domestic export composition.

India's exports trends maintain upward trajectory

As per the central government estimates, the total exports of goods and services during FY 2025-26 (April-March) are estimated at US$860.09 billion, marking a 4.22 percent increase over US$825.26 billion recorded in the previous fiscal year.

On the import side, total inbound trade rose at a faster pace, reaching US$979.40 billion, reflecting a 6.47 percent increase year-on-year.

Source: Ministry of Commerce and Industry

As a result, the overall trade deficit expanded to US$119.30 billion, compared to US$94.66 billion in FY 2024-25.

Merchandise trade: Marginal export growth, rising deficit

Export performance

Merchandise exports for FY 2025-26 stood at US$441.78 billion, registering a modest 0.93 percent growth compared to the previous year. This limited expansion suggests continued pressure on goods exports amid fluctuating global demand and commodity price volatility.

Import trends and trade deficit

Merchandise imports increased significantly to US$774.98 billion, up from US$721.20 billion in FY 2024–25. Consequently, the merchandise trade deficit widened sharply to US$333.19 billion, indicating persistent reliance on imports, particularly in energy and industrial inputs.

Non-petroleum exports show stronger momentum

Exports excluding petroleum products reached US$387.88 billion in FY 2025–26, reflecting a 3.62 percent increase over the previous year.

Similarly, non-petroleum and non-gems & jewelry exports grew to US$359.67 billion, highlighting relatively stronger performance in diversified manufacturing and value-added sectors compared to traditional commodity-driven exports.

Monthly snapshot: Trade moderates in March 2026

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In March 2026, India’s total exports (goods and services combined) were estimated at US$74.11 billion, representing a 4.58 percent decline compared to March 2025. Imports also contracted by 5.76 percent, totaling US$76.55 billion.

Despite the decline in trade volumes, the monthly trade deficit narrowed to US$2.44 billion, compared to US$3.55 billion a year earlier.

Merchandise and services breakdown

• Merchandise exports declined to US$38.92 billion, while imports fell to US$59.59 billion.
• Services exports remained relatively stable at US$35.20 billion, with imports at US$16.96 billion.

Key export drivers: Sectoral performance in March 2026

Several sectors contributed positively to export growth during March 2026:

• Petroleum products exports rose by 5.88 percent, reaching US$5.18 billion.
• Engineering goods recorded a 1.13 percent increase, maintaining their position as a major export category.
• Minerals, including mica, coal, and processed ores, saw a strong 11.27 percent growth.
• Other cereals registered a sharp surge of over 100 percent, albeit from a low base.
• Handicrafts (excluding handmade carpets) grew by 8.51 percent, indicating resilience in niche export segments.

Import trends: Broad-based decline in key categories

A range of import categories recorded contraction in March 2026, including:

1. Petroleum crude and products
2. Gold
3. Cotton (raw and waste)
4. Project goods and industrial inputs
5. Chemicals, iron and steel, and transport equipment

This decline suggests a combination of lower global prices, demand moderation, and possible inventory adjustments.

Services trade remains India’s key pillar of growth

India’s services sector continued to drive overall export performance.

• Services exports for FY 2025–26 is estimated at US$418.31 billion, reflecting a 7.94 percent growth over the previous year.
• Services imports rose modestly to US$204.42 billion.

The resulting services trade surplus expanded to US$213.89 billion, substantially offsetting the merchandise trade deficit and reinforcing the sector’s strategic importance in India’s external balance.

Shifting trade partnerships: Emerging export and import markets

India recorded strong export growth to several markets in March 2026, including:

1. Singapore
2. Malaysia
3. China
4. Tanzania
5. Sri Lanka

On an annual basis, notable growth was observed in exports to:

1. China
2. Spain
3. Hong Kong
4. Vietnam
5. Sri Lanka

Key sources of increased imports during the year included the following:

1. China
2. United States
3. Hong Kong
4. Peru
5. United Kingdom

These trends point to evolving trade linkages and diversification in both export destinations and sourcing strategies.

Business analysis: Strategic implications for trade and investment

The FY 2025–26 trade data points less to cyclical fluctuation and more to a structural realignment in India’s external sector, with clear implications for business strategy.

First, the persistent gap between import intensity and export scalability suggests that India remains a demand-driven growth market rather than an export-led one. For investors, this reinforces India’s attractiveness as a consumption and production base while simultaneously trying to position itself as a globally competitive manufacturing export hub across sectors.

Second, the increasing reliance on services exports introduces concentration risk. While the sector delivers strong surpluses, it is more exposed to regulatory shifts, digital trade barriers, and demand cycles in advanced economies. Businesses with heavy exposure to IT and digital services should factor in potential policy frictions, particularly in the US and EU.

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Third, the relative improvement in non-commodity export segments indicates a gradual shift toward value-added trade, but scale remains a constraint. Export-oriented firms will need to prioritize cost efficiency, supply chain integration, and market diversification to remain competitive amid pricing pressures.

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Fourth, elevated imports of intermediate and capital goods highlight both an ongoing investment cycle and supply chain dependencies. This creates opportunities for import substitution, localization strategies, and domestic capacity building, especially in sectors aligned with industrial policy incentives.

Finally, evolving trade partnerships signal a move toward multi-market engagement, reducing overdependence on traditional destinations. Businesses should align export strategies with high-growth regions such as ASEAN and emerging markets, while hedging geopolitical and supply chain risks.

Overall, the data suggests that India is in a transitional phase, where long-term competitiveness will depend on strengthening manufacturing depth while sustaining services-led momentum.

Outlook: Balancing export growth with structural challenges

While India’s overall exports continue to grow, the divergence between merchandise and services performance remains evident. The expansion of the trade deficit, driven by higher imports, highlights underlying structural dependencies.

Going forward, sustaining export momentum will depend on strengthening manufacturing competitiveness, diversifying export baskets, and leveraging high-growth sectors such as services and value-added goods.

This article first appeared on India Briefing, our sister platform.