Why in news?
In September 2025 India’s export prospects dimmed after the United States announced punitive tariffs of up to 50 per cent on a large share of Indian goods. The US accounts for roughly a fifth of India’s merchandise exports, so the decision triggered fears of stagnation at a time when global demand is already weak and India’s own export share has plateaued.
Historical trends
- Early gains (1990s–2010): Following economic liberalisation in 1991, India’s exports as a proportion of GDP rose from about 7 per cent in 1990 to over 20 per cent by 2010. Reforms and globalisation boosted both goods and services exports.
- Stagnation (2010–2024): Since 2010 the export‑to‑GDP ratio has mostly hovered between 17 per cent and 21 per cent. India’s global share of merchandise exports climbed from 0.5 per cent in 1990 to about 1.8 per cent by 2024, but most of these gains occurred in the earlier decades.
- Sectoral performance: Agricultural exports grew from less than 1 per cent of global share in 1990 to over 2 per cent by 2024; fuel and mining products surged thanks to petroleum exports. Manufacturing’s global share roughly tripled but remains modest at around 1.7 per cent. Within manufacturing, textiles, pharmaceuticals and steel are comparatively strong, while electronics and precision machinery lag behind.
- Services growth: India’s services exports outperform goods, rising from about 2.9 per cent of global share in 2010 to over 4 per cent in 2024. Information technology and business process management dominate, but diversification into tourism, healthcare and education remains limited.
Current challenges
- Tariff shock: The US tariffs weaponise trade and threaten India’s biggest market. Combined with a global slowdown, they may dampen export growth in the near term.
- Eroding competitiveness: Rising input costs, inadequate logistics and complex regulations reduce the competitiveness of Indian manufacturers. India’s merchandise export share has stagnated despite strong services growth.
- Over‑dependence on services: Services exports account for a larger share of India’s external earnings than goods. Within services, IT and related sectors dominate; other areas such as tourism and healthcare are underdeveloped.
- Narrow manufacturing base: A handful of sectors – textiles, pharmaceuticals, steel and chemicals – perform well. High‑value industries like electronics, precision equipment and advanced materials are still nascent.
- Global headwinds: Protectionism, non‑tariff barriers, reshoring and the weakening of the World Trade Organisation’s dispute settlement mechanism all constrain export expansion.
Government initiatives
- Export Promotion Mission: Launched in 2025, this mission includes sub‑programmes such as Niryat Protsahan for easy export credit and Niryat Disha for market access and branding support.
- RoDTEP scheme: The Remission of Duties and Taxes on Exported Products refunds embedded taxes to exporters; it was expanded in 2025 to cover sectors like steel, pharmaceuticals and chemicals.
- Simplified EPCG scheme: Reforms to the Export Promotion Capital Goods scheme now allow duty‑free import of capital goods with simpler compliance and extended deadlines for struggling sectors.
- BHARATI initiative: APEDA’s programme incubates agri‑food start‑ups, using artificial intelligence and blockchain for quality checks and traceability.
- E‑commerce export hubs: Dedicated hubs provide warehousing, customs clearance and logistics support for small exporters, with higher value thresholds for courier exports.
Implications of export stagnation
- Economic growth: Exports contribute significantly to GDP; stagnation could slow overall growth and increase reliance on domestic demand.
- Employment: Weak manufacturing exports hamper job creation in labour‑intensive industries such as textiles, leather and light engineering.
- External stability: India imports large quantities of energy and electronics. A weak export performance could worsen the balance of payments.
- Geopolitical leverage: A shrinking share of global trade may reduce India’s influence in trade negotiations and its ability to shape international rules.
Way forward
- Boost manufacturing competitiveness: Reduce logistics costs to global benchmarks, simplify compliance, and integrate deeply with global value chains. Focus on emerging sectors like electronics, electric vehicles, green technologies and semiconductors.
- Diversify markets: Lessen dependence on the US and European Union by expanding trade with Africa, Latin America and South‑East Asia. Use free trade agreements strategically to gain market access.
- Broaden services: Promote sectors beyond IT, such as healthcare, tourism, education and creative industries, to create new export engines.
- Policy and institutional support: Advocate for World Trade Organisation reforms while pursuing bilateral and regional trade pacts. Support micro, small and medium enterprises with R&D incentives and quality upgrades.
- Value addition in agriculture and fuels: Encourage agro‑processing and petrochemical value chains instead of exporting raw commodities. Branding and processing can raise incomes and resilience.
India’s export strategy needs an urgent reset. By strengthening manufacturing, diversifying markets and expanding services, India can regain momentum and secure its place in global trade.