Introduction
India's merchandise exports reached $437.1 billion in FY24 following an all-time record of $451.1 billion in FY23. This export trajectory demonstrates an interplay between short-term cyclical windfalls driven by global commodity prices and deeper structural transformations in domestic industrial and manufacturing capabilities.
Structural Transformation vs. Commodity-Price Effects
Recent export trends highlight two distinct underlying drivers:
- Commodity-Price Effects: The surge in export values post-2022 was heavily influenced by refined petroleum products, driven by Indian refiners processing discounted crude amidst elevated global crack spreads. Subsequent price cooling led to value moderation, reflecting terms-of-trade volatility rather than volume shifts.
- Structural Realignment: Non-petroleum, non-gems exports maintained steady expansion. This indicates durable structural upgrades spurred by Production Linked Incentive (PLI) schemes, import substitution, and integration into multinational supply chains.
Changing Composition and Geographical Diversification
India's export matrix has undergone substantial sectoral and spatial realignment:
- Compositional Shift toward Medium-and-High-Tech: Engineering goods formed the single largest component at $109.3 billion in FY24. Electronic goods registered a 23.6% growth to $29.1 billion, driven by smartphone assembly under the PLI scheme. Resilient sectors like pharmaceuticals contributed $27.8 billion.
- Stagnation in Labour-Intensive Segments: Traditional export anchors, including textiles, ready-made garments, and gems & jewellery, faced stagnation or contraction due to muted Western demand and stiff competition from Bangladesh and Vietnam.
- Emergence of Strategic Transit Hubs: The Netherlands emerged as India's third-largest export destination, functioning as a primary petroleum, chemical, and maritime gateway into the European Union.
- Anchor Markets and Bilateral Agreements: The United States (17.9%) and the UAE (8.2%) preserved their positions as top trading partners, reinforced by targeted agreements such as the India-UAE Comprehensive Economic Partnership Agreement (CEPA) and the Australia-India Economic Cooperation and Trade Agreement (ECTA).
Measures for Sustainable Export-Led Growth
To insulate exports from price shocks and achieve sustained long-term expansion, strategic reforms are necessary:
- Deepening Global Value Chain (GVC) Integration: Rationalise inverted duty structures and reduce tariffs on intermediate components and capital goods to encourage plug-and-play assembly operations.
- Enhancing Logistics Competitiveness: Accelerate the execution of the National Logistics Policy and PM Gati Shakti to compress domestic logistics costs from around 13% of GDP towards international benchmarks below 8%.
- Mitigating Non-Tariff Barriers (NTBs): Support domestic MSMEs with technological compliance, carbon accounting, and quality certifications to overcome hurdles like the European Union's Carbon Border Adjustment Mechanism (CBAM).
- Grassroots and MSME Export Financing: Scale the 'Districts as Export Hubs' initiative to formalise local artisan and agro-clusters, while enhancing liquidity access through digital receivables platforms such as TReDS.
Conclusion
Realising the Foreign Trade Policy 2023 target of $1 trillion in merchandise exports by 2030 requires transitioning from volatile, commodity-led surges toward high-complexity, value-added industrial exports. Strengthening infrastructure, modernising trade pacts, and supporting MSME competitiveness will be instrumental in sustaining this trajectory.