India’s merchandise exports to the United States rebounded sharply in November, recording a 22 per cent surge after two consecutive months of decline. The jump came despite steep US tariffs that have made many Indian products less competitive. While the numbers appear encouraging, a closer look suggests that temporary global factors, currency movements, and strategic stockpiling — rather than structural strength — largely drove the recovery.
What explains the sudden rebound in exports?
November emerged as one of India’s strongest export months in recent years. The surge was not limited to the US alone; exports also rose significantly to China, Hong Kong, and several European markets. This broad-based rise points to diversification in destinations, but also reflects exporters taking advantage of short-term global disruptions and market openings.
In particular, Indian exporters benefited from geopolitical tensions between China and Japan, which disrupted Japanese access to Chinese markets and opened space for Indian products.
How did China–Japan tensions help Indian exporters?
Beijing’s restrictions on imports from Japan, especially seafood, created an immediate opportunity for alternative suppliers. Indian seafood exports to China surged, contributing to a 90 per cent jump in exports to China and a 35 per cent rise to Hong Kong in November.
This diversion trade highlights how geopolitical frictions elsewhere can temporarily benefit Indian exporters. However, such gains are inherently contingent on external developments and may not be durable.
Why did exports to Europe rise sharply?
Indian exports to Europe have picked up ahead of the European Union’s Carbon Border Adjustment Mechanism (CBAM), scheduled to take effect from January 1. CBAM will impose additional duties on carbon-intensive imports, including Indian engineering goods.
Anticipating higher costs in the future, European buyers appear to have front-loaded purchases. Engineering exports grew by around 30 per cent, with shipments to Germany, Spain, and Belgium rising sharply — a classic case of pre-tax stocking rather than sustained demand growth.
How are exporters coping with high US tariffs?
One of the most striking aspects of the November data is that exports to the US rose despite tariffs as high as 50 per cent on several Indian products. Exporters are reportedly absorbing a portion of these costs to retain market access, hoping for an imminent India–US trade deal.
Expectations of partial tariff rollbacks are tied to India stepping up crude imports from the US, agreeing to source a share of its LPG imports, and signalling openness to the US in sensitive sectors like nuclear energy. However, exporters caution that fresh US orders have slowed and many existing orders may conclude by December.
What are the warning signs beneath the headline numbers?
Despite the November spike, exporters report losing future orders to competitors such as Vietnam and Bangladesh. Manufacturing hubs like Tiruppur have reportedly lost significant winter orders, suggesting that India’s price competitiveness remains under pressure.
This indicates that without tariff relief or deeper trade arrangements, India risks losing market share in the medium term, even if short-term data appear strong.
What role did the base effect and logistics disruptions play?
Part of the growth reflects a low base. In November last year, exports were hit by the Red Sea crisis, when Houthi attacks disrupted shipping routes, raised freight costs, and caused container shortages.
Although major shipping firms are still cautious about resuming Red Sea routes fully, ceasefire signals in West Asia and partial resumption of transit through the Suez Canal have improved logistics sentiment, aiding exports this year.
Which sectors showed sustained strength?
Tariff-exempt categories performed particularly well. Electronics exports grew by nearly 40 per cent, while drugs and pharmaceuticals rose by about 20 per cent. The US has also expanded its list of exempted items to include tea, coffee, spices, and certain food products, supporting continued growth in these segments.
Engineering exports, India’s largest export category, also stabilised after earlier weakness, driven mainly by European demand.
How did currency movements support exports?
The sharp depreciation of the rupee played a supportive role. The rupee weakened significantly against the US dollar, making Indian goods cheaper for foreign buyers. In November, the rupee was over 5 per cent weaker than a year earlier, enhancing export competitiveness despite global uncertainties.
However, reliance on currency depreciation is not a sustainable export strategy, especially when global demand remains volatile.
Why does this matter for India’s trade strategy?
The November surge underscores both opportunity and vulnerability. India has shown the ability to exploit shifting global conditions and diversify markets. At the same time, the data reveal dependence on short-term factors — geopolitical tensions, pre-emptive stocking, currency weakness, and base effects.
For durable export growth, India may need deeper trade agreements, improved competitiveness, and resilience against tariff shocks rather than reliance on temporary global disruptions.
What to note for Prelims?
- Carbon Border Adjustment Mechanism (CBAM)
- Red Sea shipping disruption and its trade impact
- India–US trade and tariff issues
- Role of exchange rate in exports
What to note for Mains?
- Short-term versus structural drivers of India’s export growth
- Impact of geopolitics on global trade flows
- Limits of currency depreciation as an export strategy
- Need for trade agreements to sustain export competitiveness
