India's external sector remained resilient despite global economic and trade uncertainties.
Total exports (merchandise + services) grew 6% YoY in the first nine months of FY25, reaching USD 602.6 billion.
Imports grew by 6.9% YoY, reaching USD 682.2 billion, reflecting steady domestic demand.
Non-petroleum and non-gems & jewellery exports grew by 10.4%, showing robust performance in key industrial sectors.
The world is witnessing greater trade protectionism and geo-economic fragmentation, affecting trade flows.
India needs a strategic trade roadmap to reduce trade-related costs and improve export facilitation.
Global uncertainties (elections, conflicts, shipping disruptions) impact investment decisions and risk premia, affecting capital inflows.
Foreign Portfolio Investments (FPI) showed mixed trends, with capital outflows due to global uncertainties and profit-taking.
Gross Foreign Direct Investment (FDI) saw signs of revival in FY25, but net FDI declined due to higher repatriation/disinvestment.
Forex reserves stood at USD 640.3 billion (Dec 2024), covering 90% of India’s external debt, ensuring financial stability.
Red Sea conflicts (Nov 2023) affected Asia-Europe trade, increasing shipping costs and delivery times.
Strait of Hormuz tensions (critical for global oil trade) and Panama Canal drought further disrupted supply chains.
Rising trade protectionism (e.g., US-China trade war) is shifting supply chains and increasing the use of non-tariff measures (NTMs).
Countries are preferring trade with politically aligned nations (friendshoring) and nearshoring (relocating production closer to markets).
The share of trade based on political proximity has increased since 2022, leading to shifts in global supply chains.
Traditional tariff barriers are decreasing, but NTMs (e.g., technical barriers, climate regulations) are rising globally.
NTMs impact 70% of global trade, affecting key industries like agriculture, manufacturing, and electronics.
New environmental trade measures like the Carbon Border Adjustment Mechanism (CBAM) and EU Deforestation Regulation (EUDR) could impact Indian exports.
Merchandise exports grew by 1.6%, reaching USD 313.7 billion (moderate growth due to weaker global demand).
Services exports grew by 11.6%, contributing to India’s surplus in net services trade receipts (USD 131.3 billion).
Import growth (5.2%) outpaced export growth, widening the trade deficit to USD 210.8 billion.
Non-oil, non-gold imports increased, indicating strong industrial demand.
Electronics, pharmaceuticals, and engineering goods showed strong export growth, while textiles and agricultural exports faced challenges.
Textile exports grew 7.6%, but the sector struggles due to supply chain inefficiencies, high tariffs, and global demand shifts towards man-made fibers (MMF).
India is diversifying exports by expanding into newer markets like Zimbabwe, Vietnam, and Qatar in industrial goods and medical equipment.
Diversification reduces dependence on traditional markets like the US and EU, making India’s trade more resilient.
FDI inflows have increased in FY25, but net FDI declined due to repatriation by foreign investors.
FPI witnessed volatility, with global interest rate hikes affecting inflows.
India’s macroeconomic fundamentals remain strong, attracting long-term capital investment.
Current Account Deficit (CAD) remains manageable, despite rising trade deficit.
India’s forex reserves provide a buffer against external shocks, reducing exchange rate volatility.
The rupee remained relatively stable against the dollar, supported by robust foreign exchange reserves and strong remittance inflows.
High logistics and compliance costs reduce India’s global competitiveness.
Trade protectionism and rising NTMs (climate-related barriers) could impact key Indian exports.
Limited integration into global value chains (GVCs) affects high-tech manufacturing exports.
PLI schemes for textiles, electronics, and industrial goods to enhance manufacturing capacity.
PM-MITRA parks to create world-class textile hubs and encourage vertical integration.
Deepening Free Trade Agreements (FTAs) with EU and UK to secure preferential market access.
India’s share in global services exports has doubled to 4.3% since 2005, driven by IT, consulting, and financial services.
IT and business services exports dominate, but India has untapped potential in travel, transport, and financial services.
India emerging as a hub for Global Capability Centres (GCCs), further boosting high-value service exports.
India’s e-commerce exports are growing rapidly, expected to reach USD 200-300 billion by 2030.
Government initiatives like E-Commerce Export Hubs (ECEH) and Foreign Trade Policy 2023 aim to support digital trade.
Challenges include unclear regulatory frameworks, limited infrastructure, and high compliance costs.
Strengthening trade agreements and export facilitation to enhance market access.
Leveraging digital trade and services exports for sustained foreign exchange earnings.
Adapting to global trade shifts (friendshoring, sustainability-linked trade policies) for long-term competitiveness.
Trade protectionism and NTMs could impact India’s market access.
Volatile capital flows and global interest rate movements pose risks to currency stability.
India needs structural reforms in logistics and manufacturing to reduce trade costs and boost export competitiveness.
India is strategically positioning itself amid global trade shifts by expanding export markets and deepening FTAs.
Non-tariff barriers (CBAM, EUDR) present emerging challenges that policymakers must address.
Incentives like PLI schemes and export facilitation initiatives are critical for boosting India's manufacturing exports.
Forex reserves provide financial stability, despite rising trade deficits.
FDI and FPI trends indicate strong long-term investor confidence in India.
Monetary and fiscal policy coordination is essential to managing external vulnerabilities.
Reducing trade costs, improving logistics, and integrating with GVCs will be crucial for India's export growth.
Strengthening digital trade and services exports will ensure sustained foreign exchange earnings.
Adapting to new global trade rules and sustainability regulations will determine India’s long-term trade competitiveness.
