India’s 2025 Exports Resilient, but Policy Gaps Remain

By any measure, 2025 was a harrowing year for Indian exporters, yet it was also one in which they demonstrated an extraordinary capacity to surmount challenges. While several key policies were announced, prompt and effective government support remained a missing component of the operating environment. As 2026 dawns, much will continue to be demanded of these intrepid entrepreneurs and the vast workforce that depends on India’s external markets. 

This was a year in which the very principles of competitiveness and globalisation were undermined, and the rules of global trade were cast aside, even as India struggled to leverage exports as a driver of growth. Unilateral tariffs of unprecedented scale and export controls on critical inputs strained supply chains, as manufacturers and exporters scrambled to diversify import sources and explore new markets. Domestically, India’s stable macroeconomic fundamentals, declining interest rates, and a depreciating rupee helped sustain export momentum.

Early in the year, India announced an Export Promotion Mission in the 2025-26 Budget, with details released in December. The package included Niryat Protsahan to improve access to export credit and Niryat Disha to support competitiveness, market promotion, and quality and compliance measures. The proposed outlay is ₹250.6 billion over six years, along with credit guarantee support of ₹200 billion.  

Separately, the Reserve Bank of India undertook several measures to relax loan repayment terms, extend export credit tenures, introduce flexibility in working capital management, and lengthen the permitted time for export realisation. Its calibrated approach to rupee depreciation also provided limited support to exporters. However, as many of these measures were implemented late in the year, they offered only modest relief. MSMEs in several key industrial hubs faced closures and layoffs, particularly in textiles and apparel, leather, gems and jewellery, and metal products.

The year also saw rapid progress in India’s free trade agreements (FTAs), which have been positioned as a key strategy for export resilience. The highlight was the finalisation of the India-UK Comprehensive Economic and Trade Agreement, which expands opportunities in the large UK market.  FTAs were also signed with Oman and New Zealand, both relatively small export destinations, while India opens up its much larger domestic market to these partners. Gains from the mobility agreement with Oman and the pledge of $20 billion in investments from New Zealand remain uncertain. Negotiations with the European Union are believed to be nearing a conclusion and could significantly support exports, although India is unlikely to be exempt from the EU’s onerous carbon border adjustment mechanism (CBAM) regime. Progress has also been made on other FTAs, which, once implemented, would help diversify export markets.

Reflecting the underlying resilience of the export sector, India’s merchandise exports declined by just over 1% in the ten months to October compared with the same period last year, remaining at around $369 billion. The contraction was particularly sharp in February and October, but was largely offset by strong growth in July and moderate increases in the following two months. The connection to US tariffs is obvious, as the initial reciprocal tariffs were slated to be implemented in April, and the 50% rates imposed on India took effect from August 27.  

Despite the tariff onslaught, the US emerged as a stronger destination for Indian exports, with shipments growing 15% in the year to October, driven primarily by smartphone exports, which doubled during this period. Other major export categories also recorded strong healthy growth, including pharmaceuticals, machinery, and articles of iron and steel, even as exports of gems and jewellery and petroleum products declined. Uncertainties persist, however, as monthly export figures weakened between August and October.

Moreover, an India-US trade deal remains elusive, as broader geopolitical considerations continue to delay its conclusion. 
Among other key destinations, exports to the UAE were flat despite the FTA, although the export mix shifted away from fuel towards gems and jewellery, electronics, machinery, and automobilestives. Fuel exports to the Netherlands declined sharply, while overall exports to Germany increased significantly. Export growth to China was also robust, reaching $14 billion over the ten months of 2025.

However, imports from China exceeded $102 billion, indicating a further deterioration in the adverse trade balance.
Petroleum products remained India’s top export item despite low prices and 26% contraction over ten months, followed by electronic products, which surged by over 36%. Machinery, pharmaceuticals, and automotives also recorded notable growth, while gems and jewellery exports continued to decline. 

Looking ahead to 2026, US tariffs on other countries appear to have stabilised, but disproportionately high rates continue to constrain Indian exports. The export trajectory in the coming year will be primarily shaped by prospects for an India-US trade agreement, amid ongoing trade uncertainty driven by geopolitical conflicts such as the Russia-Ukraine war and US-China trade tensions. Domestically, the export promotion package will need to be substantially expanded in the short term. Support measures for informal workers affected by export volatility should be implemented promptly, in line with the labour codes.

While newly concluded FTAs will take time to yield tangible gains, it would be unrealistic to expect global supply chains to shift decisively to India in the near term. Labour-intensive sectors, therefore, will remain under considerable pressure. The year ahead will continue to test India’s export resilience, underscoring the need for sustained and targeted policy support.

Also read: An End to a Year of Trade Shockers, But the Storm Still Rages
Also read: India’s Exports Face a Hard 2026 Despite FTA Push