Open Forum

New Delhi, 16 July 2025

India’s Trade Outlook

WILL EXPORTS BE ON RISE?

By Dhurjati Mukherjee 

The present geopolitical situation has generated a lot of discussion and has, no doubt, been a cause for serious concern among Indian industry, not to speak of exporters. The US, as is well known, remains India’s largest trading partner in FY25 with the bilateral trade valued at around $131.4 billion. No trade deal has yet been reached while President Trump recently said he will announce a 50 percent tariff on imported copper, an effort to boost US production of a metal critical to electric vehicles. military hardware, power grid and many consumer goods. 

While tariff on copper may not have much impact on India as most of copper production is used domestically, what may affect India is his announcement of tariffs on pharmaceuticals, saying the rate for medicines could reach a hefty 200 percent but that he would give drug makers about one year to get their act together. Though a year has been given, India has to seriously think of diversifying pharma export to other destinations. Experts are of the opinion that up to 30-40 percent, or even 50 percent tariff may be acceptable and could be absorbed by industryand partly by consumers but more than that the sector may be gravely hit. 

In 2024-25, India exported $4.56 billion worth of iron, steel, and aluminium products to the US, with key categories, including $587.5 million in iron and steel, $3.1 billion in articles of iron or steel and $860 million in aluminium and related articles. “These exports are now exposed to sharply higher U.S. tariffs, threatening the profitability of Indian producers and exporters,”says founder of Global Trade Research Initiative (GTRI) Ajay Srivastava. India has already issued a formal notice at the World Trade Organisation (WTO) signalling its intention to impose retaliatory tariffs on U.S. goods in response to the earlier steel tariffs. While Trump’s intentions are now not quite clear, it remains to be seen whether India will carry out the retaliation by increasing tariffs on certain U.S. exports. 

Meanwhile, Indian exports soared to a record $825 billion in 2024-25, growing over 6 percent and sustaining around 5.8 percent Compound Annual Growth Rate (CAGR) over the past decade. This indeed is a commendable performance, and optimists believe the country may be able to maintain 5 to 6 percent growth in goods, specially non-petroleum exports while services may grow even faster at 9 to 10 percent, according to Union Commerce Minister Piyush Goyal. India has deepened its footprint and diversified its exports. 

It is significant to mention that with the UAE service exports have almost doubled in the 4-5 years while with Australia, it has almost tripled. Experts believe that investments are coming to India in a big way and there are collaborations for technology as well. In the space sector, India’s dominance is well known while in the maritime front, the country is recognised as a ship-building destination. 

“Though India’s trade deficit with China grew nearly 25 times but has expanded 1.75 times between 2014-15 and 2023-24. Electrical equipment, machinery, organic chemicals and plastics are our major imports but there has been a corresponding increase in exports”, says Goyal. He further pointed out that there are plans to invest Rs 20 lakh crore in the next ten years and auto parts and sanitary ware are witnessing large investments as there is confidence in the competence of Indian companies. 

Undeniably, in such a situation where the geopolitical environment is far from conducive, India is moving ahead quite steadily. Some optimists pointed out that even if the US levies a 26 to 28 percent tariff on exports of Indian goods to the US, it will "not matter to India" and pointed out that the global view on the Indian market does not change even if the trade deal is rational and not unjustified. Meanwhile, earnings of the Indian markets are forecast to be in single digit for the impending results in Q1FY26. 

The question that comes up here is obviously to diversify exports and set up manufacturing centres in foreign countries. It is understood that there are plans to set up pharmaceutical companies in some African countries which indeed is welcome. Another important aspect is to diversify the basket of goods that India exports. The country’s technology is improving with each passing year and centres for imparting various advanced skills should be started. Experts believe with government support it would not be difficult to identify new products as also increase exports to existing markets. 

Importantly, labourintensive sectors should be identified and encouraged with special reference to traditional crafts and jewellery. This would accomplish the dual objective of employability and increasing the incomes of artisans. Simultaneously, apart from pharmaceuticals, defence exports, shipbuilding. Engineering and some electronic items and other related sectors should be taken up for increased exports. Added to this, there is every possibility of increasing exports in the textile and sports goods sectors as potential exists in many countries. While the uneasy situation in Bangladesh may help India in increasing textile exports, sports goods worth US$523.24 million was exported to the US, UK, and Australia being the top buyers. Despite global competition, India’s competitive labour costs, skilled workforce, and increasing technology adoption have positioned it as the third-largest manufacturer of sports goods in Asia. 

The government is quite industry-friendly and big business houses are getting all that they demand. It is also good to hear that the commerce minister is determined to increase exports in a big way with requisite technology and expertise. However, it needs to be pointed out that in areas such as critical minerals and magnets, where India is very much dependent on China, exploration work should be intensified. Meanwhile, collaboration with Australia from the exploration and/or processing stage may help India in the not-too-distant future. 

Finally, the key question for the country is the need to increase exports. Forecasts suggest that India's goods and services exports may surpass $900 billion with some even projecting a trillion-dollar mark for FY 2025-26. With many challenges, it goes without saying that India must forge ahead in the coming years. Whether the Union commerce minister’s prediction of achieving total exports exceeding $870 billion in 2025-26 will become a reality remains to be seen from the record $825 billion in the last fiscal.---INFA

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