India’s merchandise exports grew 19.6 percent in July, the fastest pace in nearly four years and the sharpest expansion since June 2022. Merchandise imports touched a 9-month high driven by 20 percent growth in coal, fertilisers, electronic goods and others. As a result, the goods trade deficit widened to a 6-month high of $32 billion, exceeding the average monthly deficit of $29 billion seen during April-June. If the weakening currency supported the value of exports, volatile commodity prices firmed up the import bill. The July reading caps four consecutive months of double-digit export growth—the longest stretch since 2021. Perhaps feeling encouraged, the government is targeting $1 trillion in exports this fiscal, with services accounting for $470 billion. The total for 2025-26 was $863 billion.
Though the target appears within reach given the 15 percent monthly growth during April-July, sustaining the pace will be a challenge. That’s because, as EY estimates, a part of the growth was due to the higher prices of petroleum products that India exported; excluding them, the growth stood at 12.4 percent—far lower than the needed run-rate. Commerce Minister Piyush Goyal is betting on the expanded market access and lowered tariff barriers that bilateral trade deals bring in to boost business. The combined size of the countries and trading blocs with which India has preferential trade arrangements has shot up to $60 trillion from about $10 trillion in 2014. This is heartening as healthy exports would increase economic activity, encourage investments and create jobs.
The question is if India can maximise the potential. Despite efforts, total exports, that peaked at 26.1 percent of GDP in 2013-14, have remained below potential at 19.3-22.4 percent since then. Given the fragmented global environment and supply chain disruptions, India must pursue an even more aggressive strategy and engage in local currency trade settlements. Market diversification efforts are somewhat visible. If the US, the UAE, China, the Netherlands and the UK were the top export destinations till recently, the latest data shows new entrants like Kenya, Malaysia, Tanzania, South Africa and Sri Lanka near the top. The export basket, too, is broadening. All said, much would rest on global trade demand, tariff action, supply-chain restructuring and India’s ability to ensure product quality rather than relying on price competitiveness.
