How India's Export Landscape is Adapting Amidst US Tariffs and Global Challenges

Resilience in Indian Exports Amid Tariff Challenges

New Delhi: The year 2025 saw a significant 50% tariff imposed by the US on Indian exports, yet Indian exporters have shown remarkable adaptability by exploring new markets, which has helped maintain a steady growth trajectory that is expected to continue into 2026.

A senior official from the commerce ministry remarked, "Trade is fluid, much like water, finding its own path." This adaptability has been evident as India's merchandise exports have responded swiftly to various disruptions, including the Covid-19 pandemic (2020-2022), the ongoing Russia-Ukraine conflict, the Israel-Hamas war, the Red Sea shipping crisis, and the semiconductor supply shortage, alongside the recent US tariffs.

Outbound shipments rose from USD 276.5 billion in 2020 to USD 395.5 billion in 2021, and further to USD 453.3 billion in 2022. Although they fell to USD 389.5 billion in 2023, exports rebounded to USD 443 billion in 2024, and have already reached USD 407 billion from January to November 2025.

Commerce Secretary Rajesh Agrawal announced that India's goods and services exports achieved a record high of USD 825.25 billion in the fiscal year 2024-25, marking over 6% growth year-on-year. This upward trend is expected to persist, with USD 562 billion recorded from April to November 2025, showcasing resilience in the face of global challenges.

Agrawal noted that based on current trends, India's exports are set for robust growth in 2026, especially with three free trade agreements with the UK, Oman, and New Zealand coming into effect next year, which will enhance market access for both goods and services.

Despite the high tariffs from the US, which is India's largest trading partner, exports to the US saw a 22.61% increase to USD 6.98 billion in November 2025, following a dip in September and October.

Exporters remain cautiously optimistic amid ongoing global uncertainties, hoping for a swift conclusion to the proposed bilateral trade agreement with the US and a trade deal with the European Union.

The World Trade Organisation (WTO) has forecasted a 2.4% growth in global trade for 2025, but the outlook for 2026 has worsened to just 0.5%.

The WTO highlighted that with the current tariffs and uncertain trade policies, there may be a reduction in purchases as businesses draw down on accumulated inventories, alongside signs of weakening trade and manufacturing output in developed economies.

The Indian government is optimistic that its proactive measures will support exporters in navigating these uncertainties and achieving healthy growth rates in 2026.

An official stated, "The government is actively monitoring India's exports and implementing strategies to promote them, including a comprehensive approach to mitigate the impact of US tariffs on Indian exports."

These measures include a Rs 25,060 crore export promotion mission, additional collateral-free credit facilities of up to Rs 20,000 crore for eligible exporters, debt repayment moratoriums, and leveraging free trade agreements.

In the past five years, the NDA government has signed the highest number of FTAs, including those with Mauritius, Australia, the UAE, Oman, the UK, EFTA, and New Zealand.

Experts believe that despite global challenges, India's exports will continue to grow in 2026, driven by the increasing competitiveness of domestic products and the diversification of export markets.

Rudra Kumar Pandey, a partner at Shardul Amarchand Mangaldas & Co, emphasized that the export outlook for 2026 reflects structural changes rather than a mere cyclical recovery in global trade.

He noted that electronics have become a significant growth driver, with exports rising nearly 39% in November, supported by foreign direct investment and deeper integration into global value chains. Engineering goods, pharmaceuticals, and automotive exports are also contributing to this positive momentum.

Geographic diversification is a notable trend, with exports increasingly reaching markets in Europe, East Asia, and South Asia, even as the US and UAE remain key destinations.

In November 2025, shipments to the US grew by about 22%, despite tariff pressures, while exports to Spain surged nearly 150%, alongside strong growth to China and Bangladesh.

Ajay Sahai, Director General of the Federation of Indian Export Organisations, echoed similar sentiments, stating that global supply chain realignments and India's improving business environment position exporters favorably for sustained growth.

He expressed confidence in a strong export outlook for the coming year, supported by ongoing policy initiatives and market diversification.

The diverse growth across sectors such as engineering, electronics, pharmaceuticals, apparel, textiles, marine, and services underscores the success of diversification and value addition efforts.

However, Sahai cautioned that while the export outlook is positive, Indian exporters may face challenges in 2026, including ongoing geopolitical tensions and trade fragmentation.

He warned that slower growth in major developed markets could dampen demand, while rising protectionism and non-tariff barriers may increase compliance costs. Additionally, exchange rate volatility, high freight and insurance costs, and tighter global financing conditions could affect profit margins, particularly for MSMEs.

The Indian rupee has experienced volatility in 2025, depreciating about 5% and hovering around 90/dollar by the end of December.