India’s Exports Are Under Test | The Reason Why

Looking at the cheer of higher export growth in the government today reminds me of Kaifi Azmi’s line: “Tum itna kyun muskura rahe ho, kya gham hai jisko chhupa rahe ho?” (Why are you smiling so much? What sorrow are you hiding?). Because once you look past the headlines and actually slice the data, the story looks far less comfortable.

Let’s start with the basics. Between April and November, India exported goods worth about $292 billion – a 3% rise from the previous year. Engineering goods form the largest share (27%), followed by petroleum products, electronics, agriculture, textiles and handicrafts, pharmaceuticals, gems and jewellery, and resources like metals, plastics, etc.

This year, electronics stood out with around 38% growth. The bulk of electronic exports is attributed to tariff-exempt iPhones. They have insulated India’s exports; excluding them, our export growth would have been flat.

Beyond electronics, only agricultural, pharmaceuticals and engineering goods posted modest gains while most others showed little or no growth. Petroleum exports, in contrast, declined sharply by 15%.

The US remains the most important market for Indian goods, accounting for one-fifth of total exports. The UAE comes next, followed by the Netherlands and China.

Despite higher tariffs, exports to the US grew by 11%. Some of the fastest growth came from European countries such as Spain, as well as from China, Hong Kong, and Vietnam.

This suggests that Indian exports have managed to increase not only to its traditional trading partners, but have also diversified into other regions.

After the US imposed 50% tariffs on Indian exports, there was a lot of talk about India and China quietly warming up to each other. The trade data suggests that wasn’t just noise. Shipments to China have picked up steadily over the past few months.

Both countries began looking for alternatives. China wanted to diversify its energy and food suppliers, while India was well placed to step in. Seafood exports have added to this momentum.

China’s large processing and re-export industry has been facing supply gaps as other Asian producers struggled with disease outbreaks, climate stress on fisheries, and trade frictions. Indian shrimp has been a clear beneficiary of this shift.

However, this rise was opportunistic and could be volatile, thus unreliable.

If China’s rise looks opportunistic, Europe’s surge looks fragile. The sharp rise in India’s exports to several European countries in November appears less like a demand revival and more like stocking up in advance.

The European Union will roll out its Carbon Border Adjustment Mechanism in 2026, which will increase prices of Indian steel, aluminium, cement and engineering goods for European importers.

To avoid these costs, European buyers have pre-ordered goods that would have been spread over the next year. That means, from next year onwards, even such exports to the EU might not be reliable.

The stress becomes clearer when we look at labour-intensive sectors. We see a split in agricultural exports. Higher-value segments such as tea, coffee, meat, dairy, poultry and marine products have held up quite well. However, rice exports have barely grown.

Oilseeds and oil meals exports have declined this year. Heavy tariffs have hurt India’s textile sector, with exporters losing orders to cheaper competitors like Bangladesh and Vietnam.

Many MSMEs in labour-intensive industries such as textiles and gems and jewellery also face tight credit conditions. Together, weak competitiveness and financial stress are steadily eroding their capacity and jobs.

Many headlines have argued that India should follow a slow, cautious approach to finalising the deal, given its good export performance. I believe that’s a myopic view. Headline growth numbers hide as much as they reveal. Yes, Indian exporters showed resilience under pressure. But resilience is not the same as strength, and it is certainly not a reason to relax.

Some argue that cheap Chinese goods are the real drag on India’s exports. But that doesn’t explain why peers like Vietnam, Malaysia, the Philippines, Indonesia, Mexico, and Türkiye have posted solid export growth in the first 10-11 months of this year. India, by contrast, has seen exports stay almost flat.

That is why concluding a trade deal with the US matters. Apart from boosting exports, it matters in the current geopolitical environment. The US remains India’s largest trading partner.

Lingering uncertainty weakens India’s negotiating position and leaves exporters stuck in limbo. India has already compromised key economic decisions, including cutting Russian oil imports, under pressure from the US. Waiting indefinitely for the next twist is not a sustainable option.

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