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India’s export performance in the fiscal year 2024-25 remained largely flat in aggregate value for goods compared to the previous year, a puzzling outcome amidst a growing global trade landscape. However, a robust showing by the services sector propelled the country’s overall export revenue to an estimated increase. The latest data highlights a divergence in the performance of key sectors and underscores the differing mechanisms for reporting trade data for goods and services.
Official figures reveal that merchandise exports in 2024-25 totaled approximately $437 billion, a value strikingly similar to the previous fiscal year, indicating near-zero growth. This follows a decline in the preceding year, marking two consecutive years of tepid performance for goods exports, a notable contrast to the peak achieved in 2022-23. The stagnation in goods exports is particularly conspicuous when viewed against the backdrop of positive growth in global trade and export expansion experienced by several economies in Southeast Asia and China during the 2024 calendar year. This situation prompts a closer examination of the factors hindering India’s merchandise export momentum, especially given the critical role exports play in driving domestic economic growth and job creation.
The reporting of goods export data benefits from a more streamlined process. Information is captured in near real-time through customs declarations and port procedures, often in a readily usable digital format. Supplementary data from Goods and Services Tax (GST) payments on exports further aids in quickly consolidating and reporting these figures.
In stark contrast, the final reconciliation and confirmation of services export data involve a more extended process, requiring integration with the banking system and validation by the Reserve Bank of India. Additionally, the nature of service delivery, often spanning extended contractual periods, contributes to the longer lead time in compiling comprehensive services export statistics. The aspiration remains to achieve real-time data availability for both goods and services trade, facilitating a more immediate comparison with data reported by importing nations.
Despite the static picture in merchandise exports, the aggregate figure masks diverse performances across different sectors. The electronics sector emerged as a star performer, registering significant export growth, with a substantial increase in smartphone shipments. A notable contributor to this surge was the export of iPhones, solidifying India’s position as a significant manufacturing hub for the tech giant. Other sectors that demonstrated double-digit growth include engineering goods, encompassing machinery, as well as auto-components and pharmaceuticals.
However, the overall zero growth in goods exports is largely attributable to a significant decline in certain key sectors. The gems and jewellery sector, traditionally a strong contributor to India’s exports, experienced a considerable downturn. This decline, reaching a two-decade low, is partly attributed to softened demand in major luxury markets like the United States and China. Increased competition from other players in Southeast Asia and the rising prominence of more affordable, high-quality lab-grown diamonds also appear to have impacted this sector, which historically held a dominant position in the global diamond polishing industry.
The petroleum sector also played a significant role in the flat merchandise export numbers. Despite an increase in export volumes of refined products such as petrol and diesel, which constitute a substantial portion of India’s dollar earnings from exports, the revenue generated declined due to a fall in global oil prices during the fiscal year. The inherent volatility of oil prices and the inelastic nature of its demand highlight a vulnerability associated with a heavy reliance on petroleum product exports for foreign exchange. Both the diamond polishing and oil refining sectors are characterized by relatively low value addition and a high import dependency.
Furthermore, the persistent strength of the Indian rupee, potentially influenced by the central bank’s actions in managing the exchange rate, may have also presented headwinds for exporters over the past two years of subdued performance. The optimal exchange rate for the rupee in the context of India being a net importer of dollars remains a subject of ongoing discussion.
In a brighter development, services exports demonstrated robust growth in 2024-25, building on strong performances in preceding years. This sector, which includes major components like software services and business process outsourcing, has been expanding steadily. Global capability centers and knowledge process outsourcing, along with consultancy and financial services, also recorded impressive growth rates. The sustained strength of services exports suggests that this sector could soon surpass manufacturing in terms of overall export value.
Cumulatively, India’s total exports, encompassing both goods and services, are estimated to have registered an increase in 2024-25, reaching approximately $821 billion. Looking ahead, there is potential for India to significantly boost agricultural exports and capitalize on evolving global trade dynamics, including potential shifts in trade relationships that could favor Indian goods in certain markets. Exploring opportunities to increase the supply of agricultural commodities to markets like China, particularly in light of changing trade patterns, could prove beneficial. While India’s trade with major partners like the US and China has grown, there remains considerable untapped potential in accessing large consumer markets. The shifting geopolitical landscape is undoubtedly reshaping global trade flows, presenting India with opportunities to strategically enhance its export footprint in both Western and Eastern markets.
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