India’s Trade Resilience: Services Exports Lead the Way Amid Global Uncertainty

By Suryavanshi IAS

In an increasingly protectionist and geopolitically volatile global economy, India's trade sector has demonstrated a quiet but significant victory in the first quarter of FY 2025–26. The country’s overall trade deficit narrowed by 9.4% to $20.3 billion, driven primarily by robust performance in services exports, which grew by nearly 11%, according to the latest data released by the Ministry of Commerce and Industry.

This development not only reflects India’s growing strength in the global services market but also reinforces its ability to balance its trade books even amid headwinds like volatile crude prices, supply chain shifts, and slow global demand.

📦 A Strong Start: India's Q1 Trade Snapshot

Trade Component	Q1 FY25–26	Q1 FY24–25	Growth
Overall Exports	$210.3 billion	$198.5 billion	↑ 6%
Services Exports	$98.1 billion	$88.5 billion	↑ 11%
Merchandise Exports	$112.2 billion	~$110 billion	↑ 2%
Overall Imports	$230.6 billion	~$221 billion	↑ 4.4%
Trade Deficit	$20.3 billion	$22.4 billion	↓ 9.4%

🌐 India’s Services Sector: The Real Export Engine

The sharp increase in services exports has emerged as the most encouraging trend. While merchandise exports remained sluggish due to a fall in petroleum prices, services exports — driven by IT, financial, business process outsourcing (BPO), consulting, fintech, and digital services — surged significantly.

This shift signals a deeper structural transition:

India is moving beyond traditional export reliance on goods like textiles, gems, and oil derivatives
It is becoming a leader in knowledge-based exports amid rising global demand for tech-driven, digital, and remote services

In a world moving toward digitization and AI-led growth, India's educated workforce and IT ecosystem offer a powerful comparative advantage.

🛢️ Non-Petroleum Exports Show Promise

While total merchandise export growth remained modest at 2%, the non-petroleum component rose 6%, according to Commerce Secretary Sunil Barthwal. This indicates that India’s core sectors are performing better than they appear when oil-related distortions are removed.

Sectors such as engineering goods, pharmaceuticals, electronics, and chemicals contributed to this uptick — many of which benefit from:

Production-Linked Incentive (PLI) schemes
Improved logistics infrastructure
Diversification away from traditional export markets

🛬 Imports Rise, But With a Silver Lining

India’s total imports grew by 4.4%, reaching $230.6 billion in Q1. Merchandise imports were up by 4.2% and services imports by 4.9%.

At first glance, rising imports might raise alarm. But within this increase lies a positive signal: a growing economy requires more intermediate goods, capital equipment, and raw materials, especially for manufacturing and infrastructure development.

As Mr. Barthwal pointed out, the trade composition — rather than the volume — matters. Productive imports feeding into high-value exports or domestic production are signs of healthy economic momentum.

📈 Towards Record-Breaking Exports?

In FY2024–25, India’s total exports hit a historic high of $825 billion. If the current pace continues, as indicated by Q1 performance, India may surpass this record in FY2025–26 — especially if global demand recovers in the second half of the year.

“If exports grow the way they have grown in quarter one, then we are going to beat last year’s record exports,”
— Sunil Barthwal, Commerce Secretary

With the WTO revising global trade growth downward, India’s performance stands out as a positive outlier, showing both strategic resilience and sectoral diversification.

🧩 Trade Strategy Going Forward

India’s trade success in Q1 is encouraging, but sustained performance will require bold policy interventions, especially in the face of:

Ongoing geopolitical uncertainty (Russia-Ukraine, Red Sea disruptions, China-US decoupling)
Uncertain global demand from EU, UK, and East Asia
Slow recovery in global investment and cross-border capital flows

Key strategic priorities:

Boosting export infrastructure (port logistics, customs digitization)
Strengthening services trade agreements, especially in ASEAN, Africa, and Latin America
Expanding PLI schemes to more tech-enabled sectors
Deepening trade with trusted partners through FTAs (e.g., UAE, Australia, EU negotiations)

🇮🇳 Conclusion: A Quiet Trade Turnaround

The narrowing of India’s trade deficit, powered by surging services exports and steady non-petroleum goods growth, reflects a quiet structural transformation in the country’s trade profile. While global conditions remain uncertain, India’s blend of policy stability, digital capability, and export diversification offers a credible path forward.

In a world of supply chain realignments and shifting economic alliances, India’s trade ecosystem is maturing — learning not just to survive, but to strategically position itself as a reliable export hub for the 21st century.

📌 For UPSC Aspirants

Relevant GS Papers:

GS-3: Indian Economy, External Sector, Trade Policy, Services Sector
GS-2: WTO, FTAs, International Trade Agreements

Sample Mains Question:

“India’s export resilience is increasingly driven by services rather than goods. Analyze the implications of this shift for long-term trade strategy.” (Answer in 250 words)

Prelims Pointers:

Which sectors have the highest export growth?
Components of trade deficit
WTO’s role in global trade monitoring
India's top services export destinations

Suryavanshi IAS

Tuesday, July 15, 2025