India’s Export Challenges

  • 12 Sep 2025

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India’s merchandise and services exports, once a key driver of economic growth, face mounting challenges amid global protectionism and domestic structural constraints. Recently, the imposition of a 50% tariff by the United States, which accounts for roughly 20% of India’s exports, threatens stagnation in the country’s largest trading partner market, highlighting vulnerabilities in export competitiveness.

Historical Export Trends

Between 1990 and 2010, India’s exports as a share of GDP rose from 7.1% to 20.4%, supported by liberalisation, reforms, and global integration. Merchandise and services exports contributed jointly, with sectors such as textiles, pharmaceuticals, and IT-BPM emerging as strong performers. However, from 2010 to 2024, India’s export growth decelerated; the GDP share dipped to 17.7% by 2020, recovering only marginally to 21.2% by 2024, while India’s global merchandise share rose modestly from 0.51% (1990) to 1.81% (2024). Most of the early gains were concentrated in the first two decades of liberalisation.

Sector-wise performance shows uneven growth: agricultural exports increased from 0.85% to 2.22%, fuel and mining exports surged from 0.32% to 2.62%, led by petroleum, while manufacturing, despite tripling to 1.73%, continues to lag. Services exports have outperformed goods, rising from 2.9% of global share in 2010 to 4.2% in 2024, largely concentrated in IT, telecom, and business services.

Structural Challenges

India’s exports confront multiple structural constraints:

  1. Tariff Shock from US: The punitive 50% tariffs jeopardise India’s most buoyant market and compound the effects of a global slowdown.
  2. Competitiveness Erosion: Rising production costs, inefficient logistics, and regulatory complexity reduce India’s global manufacturing edge.
  3. Overdependence on Services: India’s services exports are twice that of goods, with IT/ITES dominating and other sectors contributing only around 40%.
  4. Narrow Manufacturing Base: While textiles, pharma, steel, and chemicals perform well, high-value sectors such as electronics, precision machinery, and advanced materials remain underrepresented.
  5. Global Headwinds: Protectionist policies, reshoring trends, non-tariff barriers, and a weakened WTO dispute settlement system limit India’s options.

Policy Initiatives

Several steps have been undertaken to revive exports:

  • Export Promotion Mission (EPM 2025): Sector-specific programs like NiryatProtsahan (credit facilitation) and Niryat Disha (market access, branding, logistics).
  • RoDTEP Scheme: Refunds hidden central, state, and local taxes on exports, expanded to steel, pharma, and chemicals.
  • Simplified EPCG Scheme: Facilitates duty-free import of capital goods, with eased compliance.
  • BHARATI Initiative for Agri-Food Exports: APEDA’s 2025 program to incubate 100 startups with AI quality checks and blockchain traceability.
  • E-Commerce Export Hubs: Warehousing, customs clearance, and logistics support for MSMEs.

Way Forward

  • Enhance Manufacturing Competitiveness: Improve logistics efficiency (from 13–14% of GDP to global benchmark 8%), integrate with global value chains, and focus on electronics, EVs, green technologies, and semiconductors.
  • Diversify Export Markets: Reduce dependence on US/EU markets by targeting Africa, Latin America, and ASEAN; leverage FTAs with UAE, Australia, and UK.
  • Deepen Services Export Base: Expand beyond IT to healthcare, tourism, education, financial and creative services.
  • Agriculture and Fuels: Promote agro-processing, value addition in petrochemicals, and branded exports.
  • Policy and Institutional Support: Advocate WTO reforms, pursue bilateral/multilateral agreements, and incentivise R&D and quality upgradation in MSMEs.

Conclusion

India’s exports face weak merchandise growth, concentrated services reliance, and external shocks such as US tariffs. A multi-pronged strategy—strengthening manufacturing, diversifying markets, deepening services, and fostering value addition—remains critical to reclaim India’s global export momentum and support sustainable economic growth.