India’s trade performance in the third quarter of the financial year 2024-25 showed steady growth despite global uncertainties. Merchandise exports rose by 3% to $108.7 billion while imports increased by 6.5% to $187.5 billion. A strong services sector surplus of $52.3 billion, driven by a 17% rise in services exports, helped reduce the trade deficit. This period also marked changes in US trade policies that hold implications for India’s export landscape.
Merchandise and Services Trade Overview
India’s exports maintained a stable composition with notable growth in high-value products. Aircraft, spacecraft, and parts entered the top ten export categories with over 200% year-on-year growth. Digitally Delivered Services (DDS) exports reached $269 billion in 2024, ranking India as the fifth-largest exporter globally. High-tech merchandise such as electrical machinery and arms/ammunition have sustained a 10.6% compound annual growth rate since 2014.
Impact of US Tariff Changes
The latest US tariff realignments offer India a relative advantage over other competitors. Sectors like pharmaceuticals, textiles, and electrical machinery stand to gain from this shift. India’s tariff competitiveness creates opportunities to increase market share in the US. However, the changing trade environment requires India to adapt policies swiftly to maximise benefits and navigate uncertainties.
Geopolitical and Technological Influences
Global trade is undergoing transformation due to geopolitical tensions and rapid technological advancements. These factors introduce volatility but also open new avenues for India’s trade growth. India’s strategic engagement with key markets, particularly the US, reflects an effort to leverage these changes through innovation and competitiveness.
Policy Recommendations and Future Outlook
To capitalise on evolving trade dynamics, India needs agile policymaking focused on trade facilitation and market access. Strengthening trade infrastructure and enhancing export competitiveness are crucial. Forward-looking strategies should address sector-specific challenges and global shifts to sustain growth in both merchandise and services trade.
Significance for Economy and Stakeholders
India’s growing presence in global trade puts stress on its economic advancement. The combined strength of merchandise and services exports marks diversification and resilience. This growth benefits policymakers, industry players, and academia by providing data-driven insights for informed decision-making and strategic planning.
Questions for UPSC:
- Point out the effects of changing US trade policies on emerging economies like India and analyse the strategies India can adopt to enhance export competitiveness.
- Critically analyse the role of Digitally Delivered Services (DDS) in India’s trade growth and estimate its potential impact on the country’s economic development.
- Underline the influence of geopolitical tensions on global trade patterns and discuss how countries can mitigate risks while exploiting new trade opportunities.
- What are the challenges faced by India in integrating high-tech merchandise into its export basket? With suitable examples, estimate the policy measures required to overcome these challenges.
