India’s exports remained largely muted in FY 2025–26, with merchandise exports growing just 0.9% to $441.8 billion, as weak global demand and geopolitical disruptions weighed on outbound shipments.
At the same time, faster growth in imports widened the country’s trade deficit, underscoring rising external vulnerabilities even as overall trade hit record levels.
According to data released by Union Ministry of Commerce, merchandise imports rose 7.5% to $775 billion during the year, pushing the merchandise trade deficit up 17.5% to $333.2 billion.
Including services, total exports rose 4.2% to $860.1 billion, while imports increased 6.5% to $979.4 billion, widening the overall trade deficit by 26% to $119.3 billion. Total trade stood at a record $1.84 trillion, up 5.4% year-on-year.
Gulf war disrupts March trade flows
The impact of the ongoing West Asia conflict became particularly visible in March, as disruptions in shipping through the Strait of Hormuz hit both exports and imports.
India’s exports to the UAE plunged 61.8% to $1.3 billion during the month, while shipments to Saudi Arabia fell 45.6%. Imports from key Gulf partners also declined sharply, with inflows from the UAE down 66.2% and Saudi Arabia falling 36.4%.
Crude oil and petroleum-product imports dropped 35.8% year-on-year in March to $12.2 billion as Strait of Hormuz disruptions choked oil shipments.
Despite global headwinds, exports to the US remained relatively resilient, rising 0.9% to $87.3 billion during FY26, even as tariffs on Indian goods remained elevated.
Services exports provide support
While goods exports remained weak, services exports continued to support India’s external sector, rising 7.9% to $418.3 billion—bringing them close to merchandise exports for the first time.
According to Global Trade Research Initiative (GTRI), if current trends persist, services exports could surpass goods exports in FY27, marking a structural shift in India’s export profile. However, emerging risks from artificial intelligence could disrupt traditional outsourcing and IT services models.
Import dependence remains a concern
The widening deficit reflects India’s continued dependence on imports, particularly in electronics, energy, and industrial inputs.
Electronics imports crossed $100 billion for the first time, rising 17.7% to $116.2 billion, even as exports in the segment grew to $48 billion. Meanwhile, India’s trade deficit with China widened to a record $112.1 billion, highlighting reliance on Chinese components, machinery, and chemicals.
Rising global exposure
With total trade now accounting for nearly 44% of GDP, India’s economy is becoming increasingly integrated with global markets—but also more exposed to external shocks.
GTRI noted that the Gulf war and disruptions in the Strait of Hormuz underscore how quickly geopolitical tensions can impact trade and energy flows, even as structural import dependencies continue to shape India’s external sector outlook.
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