Economy watch July 2026

India’s US$1 trillion export ambition: Is the milestone within reach?

D. K. Srivastava, Chief Policy Advisor, EY India
D. K. Srivastava

Chief Policy Advisor, EY India

5 minute read 28 Jul 2026
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India aims to achieve US$1 trillion in total exports in FY27.

In brief

  • India’s exports of goods and services reached a peak of 26.1% of GDP in FY14, but have since remained broadly range-bound between 19.3% and 22.4%.
  • Total exports at 22.2% of GDP in FY26 reflect both long-term expansion of India’s export base and the constraints due to a more fragmented global trade environment.
  • Reaching the US$1 trillion export target in FY27 would require total exports to grow by about 15.3% from a level of US$0.87 trillion in FY26.

Changing global trade environment

The global trade environment has changed significantly since the mid-2010s, with a visible shift from multilateral trade liberalization toward deglobalization, fragmentation, and higher tariff and non-tariff barriers. FY21 was affected by Covid-related disruptions, FY22 by favorable base effects and FY23 by the Russia-Ukraine conflict. As a result, India’s annual export growth showed considerable volatility across key destinations in the past few years. More recently, India’s exports have faced additional headwinds from tariff-related uncertainties and geopolitical disruptions in the Middle East. 

The year 2025 was marked by US tariff actions. Tariff hikes were announced in April 2025 but paused for 90 days. In August 2025, the US implemented a 25% tariff on Indian merchandise exports, which was later increased to 50%. Subsequently, India and the US negotiated an interim trade framework, leading to a reduction in US tariffs on Indian goods to 18% in early February 2026. Later in February 2026, following a US Supreme Court ruling, global US tariff rates were lowered to 10%. This temporary tariff was meant only for a duration of 150 days, expiring on 24 July 2026. Thus, the US, on 23 July 2026, announced new tariffs relating to the investigation into ‘forced labor’ on 60 of its trading partners including India with India’s tariff rate at 10%[1].  

Exports to the US, which had contracted in FY24 followed by a growth of 11.6% in FY25, slowed in FY26 to 0.9%. Exports to other key destinations also weakened in FY26, including those to the Netherlands, the UK and Singapore, where exports contracted by (-)23.1%, (-)7.6%, and (-)8.6%, respectively. 

This underlines India’s exposure to policy uncertainty in major export markets and reinforces the need for greater country and product diversification.

India’s bilateral free trade agreements

Given the deceleration in global trade and the growing fragmentation of supply chains, India has pursued a trade strategy of entering into multiple bilateral and regional trade arrangements. Major bilateral free trade agreements have been negotiated, in one form or another, with 18 countries or economic groups. India is also a signatory to seven multilateral trade blocs, including SAARC, ASEAN, and SAFTA.

In addition to trade agreements, India has expanded arrangements for bilateral trade settlement in domestic currency through Special Rupee Vostro Accounts (SRVA). As per official information available on 7 February 2025, 123 correspondent banks from 30 trading partner countries had opened 156 SRVAs with 26 Indian banks. The RBI has further liberalized the framework by allowing banks to open SRVAs without prior RBI approval and by facilitating public disclosure through an SRVA Directory maintained by the Foreign Exchange Dealers’ Association of India.

This trade strategy can support export diversification over the medium term by reducing dependence on a few traditional markets and by facilitating trade with newer partners, including emerging economies and countries participating in local currency settlement arrangements.

Exports of goods vis-à-vis exports of services

India’s goods and services exports as a share of nominal GDP (2022-23 series, spliced) increased steadily after FY91, peaking at 26.1% in FY14 (Chart 1). Since then, the ratio has declined and partly recovered, standing at 22.2% in FY26. This period coincides with a broader global transition from relatively barrier-free multilateral trade toward more fragmented trade arrangements.

A major structural change has been the rising importance of India’s services exports. The share of merchandise exports in India’s total exports declined from 73.6% in FY01 to 51.4% in FY26, while the share of services exports rose correspondingly to 48.6% in FY26 (Chart 2). In value terms, both goods and services exports have increased over the long term, but merchandise exports have nearly flattened after FY22, whereas India’s services exports have continued to expand at a faster pace. 

Going forward, the outlook for goods exports will depend on global demand, tariff barriers, supply-chain restructuring, and India’s ability to diversify products and destinations. The outlook for India’s services exports will also be shaped by technological change, especially the adoption of AI in service delivery.

Important goods and services in India’s exports profile

India’s goods export basket has undergone important changes. Engineering goods now account for more than one-fourth of India’s merchandise exports and have gained a share of 7.0% points since FY10-12 (Table 1). Petroleum products remain the second-largest category, accounting for 15.4% of goods exports during FY24–FY26, reflecting India’s versatile refining capacity. 

Electronic goods exports have also gained significant share, accounting for 8.8% of total goods exports during FY24–FY26. Drugs and pharmaceuticals exports contributed 6.8%, followed by organic and inorganic chemicals at 6.6%. By contrast, gems and jewelry have lost significant share, falling from an average of 16.0% during FY10–FY12 to 6.9% during FY24–FY26. 

In services exports, telecommunications, computer, and IT remain the dominant category, accounting for nearly half of total services exports (Table 2). The most notable gain has been in “other business services,” whose share increased from 18.6% in FY12-14 to 27.7% in FY24-26. This category includes R&D services, professional and management consulting, and technical, trade-related, and miscellaneous business services. Travel, transport, and financial services have seen a decline in share over time. However, these five categories together still accounted for about 95% of India’s services exports during FY24–26. 

Major destinations: Need for export diversification

India’s merchandise exports remain concentrated in a few major destinations. In FY26, the US was India’s largest export market, accounting for nearly 20% of total merchandise exports, increasing from 10.9% in FY10 (Table 3). This rising dependence has created opportunities but has also implied increased exposure to US trade and tariff policies.

The UAE’s share declined from 13.4% in FY10 to 8.5% in FY26, while China’s share fell from 6.5% to 4.4%. The Netherlands, the UK and Singapore remain key destinations, but the share of all ‘other’ countries has stayed broadly stable at nearly 58%, indicating scope for deeper diversification into newer markets.

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Commodity patterns also differ across destinations

Exports to the US have increasingly been led by electronic goods, including mobile phones, along with engineering goods such as iron and steel products and electrical machinery. In the UAE, key exports include gems and jewelry, engineering goods, petroleum products, and electronic goods, although the share of gems and jewelry has nearly halved from 39.3% in FY20 to 23.2% in FY26. Exports to China are led by engineering goods, electronic goods, and petroleum products.
 

Reaching US$1 trillion in exports

India’s total exports in FY26, consisting of exports of goods as well as services, amounted to US$0.87 trillion. Exports of goods contributed US$0.45 trillion and that of services US$0.42 trillion. India aims to reach a target of US$1 trillion total exports[2]. Achieving this in FY27 would call for a growth of 15.3%. Already in 1QFY27, goods exports have shown an y-o-y growth rate of 15.9%. This was partly due to higher prices of petroleum products which India was able to export. Excluding exports of petroleum products, growth in exports of non-petroleum products amounted to 12.4% in 1QFY27. Services exports growth in the first two months of FY27 was 7.8%. These were months affected by the crisis in Middle East. Achieving a threshold of US$1 trillion of exports appears to be around the corner. It may be achieved in FY27 or soon afterwards.


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Summary

Going forward, India’s export growth may be facilitated by the strategy of diversification based on multiple bilateral FTAs. Trade is also likely to be facilitated with countries having arrangements for local currency trade settlement. Intra-BRICS+ trade is also expected to aid growth of Indian exports. The share of exports to some of the traditional destinations such as the US and of some of the traditional products such as gems and jewelry, however, may see a slowdown. There is high export growth potential for electronic and engineering goods and refined petroleum products, pharmaceuticals, chemicals and, over time, defence exports.

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About this article

D. K. Srivastava, Chief Policy Advisor, EY India
D. K. Srivastava
Chief Policy Advisor, EY India
A noted economist, D.K. Srivastava is an Honorary Professor at Madras School of Economics and Member of the Advisory Council to the 15th and 16th Finance Commissions.
Related topics
Tax
Tax compliance
Tax accounting
Tax controversy
Tax planning
Global tax reform
Global trade

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