India’s Export Strategy

India’s foreign trade framework is guided by the Foreign Trade Policy (FTP) 2023, an open-ended, dynamic policy that broke away from traditional five-year policy cycles. The strategy establishes a long-term target of reaching $2 trillion in cumulative exports by 2030, with an equal split of $1 trillion each from merchandise and services trade. To institutionalize this approach, the Ministry of Commerce launched an Export Promotion Mission (EPM) backed by a ₹25,060-crore structural envelope to remove operational bottlenecks.

Current Export Performance Landscape

India registered its highest-ever annual export performance during the financial year 2025-26. Combined exports of merchandise and services grew by over 4% to reach an all-time high of $860.09 billion, up from $825.26 billion in FY24-25. While services exports act as the primary engine of high-velocity growth, non-petroleum merchandise exports have provided baseline stability against global supply chain vulnerabilities.

Macroeconomic Trade Profile (FY 2025-26)

Structural Shifts in the Export Basket

High-Tech Industrial Escalation

The composition of India’s merchandise basket reflects a structural transition from low-value raw commodities to high-technology engineering and electronics manufacturing. Electronic goods exports rose significantly to $47.96 billion in FY25-26 compared to $38.56 billion in the previous fiscal year, driven by localized production of smartphones, advanced IT hardware, and telecom systems. Simultaneously, engineering goods remained the single largest industrial component, bringing in $122.43 billion.

Dominance of Knowledge-Based Services

Services exports reached a record $418.31 billion in FY25-26. This expansion has moved beyond traditional legacy software maintenance into high-value knowledge verticals managed through Global Capability Centres (GCCs). High-performing service components include cloud computing architectures, artificial intelligence systems, legal process outsourcing, engineering design, and specialized corporate consulting.

Structural Composition of Key Export Verticals

Institutional Pillars of the Foreign Trade Policy

Transition from Subsidies to Duty Remission

The trade architecture has shifted away from direct, compliance-heavy export incentive schemes toward automated, World Trade Organization (WTO)-compliant duty remission frameworks. The primary instrument is the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme, which returns un-refunded central, state, and local levies incurred during production. This benefit was extended to Export Oriented Units (EOUs) and Special Economic Zones (SEZs) to level the playing field for international pricing.

Decentralization via Regional Economic Alignment

The strategy expands export generation across domestic territories through the “Districts as Export Hubs” initiative. Under this framework, District Export Promotion Committees (DEPCs) identify unique local products, establish targeted infrastructure support, and resolve logistical bottlenecks at the grassroots level. This setup connects rural MSMEs, traditional artisanal clusters, and GI-tagged agricultural products directly with international distribution chains.

Complete Digitization of Trade Compliance

The Directorate General of Foreign Trade (DGFT) has automated its compliance processes through an integrated online platform. Key administrative milestones—including the issuance of Importer Exporter Codes (IEC), Registration-cum-Membership Certificates (RCMC), electronic Certificates of Origin (e-CoO), and Bank Realisation tracking—are fully electronic. This setup cuts transaction costs, shortens clearance times, and minimizes regulatory friction.

Strategic Market Diversification and Economic Alliances

Restructuring Traditional Trade Corridors

India’s external trade strategy focuses on moving past a reliance on a few single destinations toward broader international markets. While the United States remains the top trading partner with $87.31 billion in total trade, high-performing export sectors have expanded their footprints across the European Union (led by Spain and the Netherlands), West Asia, and South America.

The New Generation of Free Trade Agreements (FTAs)

India is executing targeted, high-impact bilateral agreements designed to secure zero-duty market access for labor-intensive and high-tech manufacturing sectors.

• India-EFTA Trade and Economic Partnership Agreement (TEPA): Provides zero-duty market access for 99% of Indian exports across Switzerland, Norway, Iceland, and Liechtenstein, backed by long-term foreign direct investment commitments.
• Oman Comprehensive Economic Partnership Agreement (CEPA): Secures immediate duty-free market access for over 98% of Indian merchandise exports, benefiting engineering goods, textiles, and electronics.
• Bilateral Negotiations Pipeline: India has commenced formal trade negotiations with Israel and Brazil, targeting a bilateral trade volume of $30 billion by 2030, alongside ongoing trade negotiations with the United Kingdom and the European Union.

Critical Bottlenecks and Counter-Measures

The Trade Deficit and Input Dependencies

Despite record export performance, India’s aggregate trade deficit reached $119.30 billion in FY25-26, driven by a higher import bill of $979.40 billion. This structural imbalance stems from an inelastic demand for crude oil, electronic inputs, coal, and gold. Furthermore, key manufacturing sectors face supply vulnerabilities due to a reliance on imported intermediate components and Active Pharmaceutical Ingredients (APIs).

Logistics Inefficiencies and Inverted Tariffs

• Logistics Overhead Costs: Domestic logistics costs hover near 7.97% of GDP. While this represents a drop from historical levels of 14%, it still creates a cost disadvantage compared to the 6% benchmarks of advanced East Asian hubs.
• Inverted Duty Structures: A tariff anomaly where raw materials and intermediate inputs are taxed at higher rates than finished final products, discouraging domestic components processing.
• Non-Tariff Quality Barriers: Frequent changes in international sanitary, phytosanitary, and technical specifications restrict market entry for small-scale exporters.

Government Interventions for Supply Chain Safety

UPSC Prelims Core Concepts and Economic Trivia

Key Terms for Civil Services Examination

• Deemed Exports: Refers to transactions where the specified goods supplied do not leave the country, but the payment is received in Indian Rupees or convertible foreign exchange, typically involving supplies to SEZs or infrastructure projects.
• Inverted Duty Structure: A fiscal anomaly where imported raw inputs carry higher tariff duties than finished manufactured goods, penalizing local value-addition.
• SCOMET Classification: An acronym for Special Chemicals, Organisms, Materials, Equipment, and Technologies. These items feature on India’s dual-use export control list, requiring explicit DGFT authorization to meet international non-proliferation commitments.
• Zero-Rated Exports: A taxation principle under GST where the entire supply chain of an export product is exempted from domestic taxes, ensuring that internal tax overheads are not exported to global consumers.

Reference Indexes and Institutional Standings

• Logistics Performance Index (LPI): Published by the World Bank Group; measures countries on customs efficiency, trade infrastructure quality, and delivery timelines.
• Logistics Ease Across Different States (LEADS): An annual domestic index tracking state-by-state logistics performance and regulatory ease inside India.
• World Investment Report: Formulated by UNCTAD; tracks foreign direct investment trends, ranking India among the top global host destinations for manufacturing capital.