India’s exports adapt to US tariffs in 2025, growth momentum likely to continue in 2026

India’s exports remained resilient in 2025 despite a steep 50 per cent duty imposed by the United States, with exporters adapting through market diversification and the government projecting that momentum is likely to extend into 2026.

As one of the senior-most officers of the commerce ministry said, “trade is like water, it finds its own course,” as India’s merchandise exports responded with agility to multiple global disruptions, including the Covid-19 pandemic (2020-22), the Russia-Ukraine war (since 2022), the Israel-Hamas war (since 2023), the Red Sea shipping crisis (2023-24), the semiconductor supply crunch, and now high US tariffs.

India’s outbound shipments rose from USD 276.5 billion in 2020 to USD 395.5 billion in 2021 and USD 453.3 billion in 2022. Exports declined to USD 389.5 billion in 2023 before recovering to USD 443 billion in 2024. In 2025 so far (January-November), exports have reached USD 407 billion.

Commerce Secretary Rajesh Agrawal said India’s exports of goods and services touched a historic high of USD 825.25 billion in 2024-25, recording over 6 per cent year-on-year growth. He said the upward trajectory has continued into the current fiscal year, with exports of USD 562 billion during April-November 2025.

“Based on current trends, India’s exports are poised to deliver solid growth in 2026 as well. Notably, three free trade agreements — UK, Oman, and New Zealand — will enter into force next year, unlocking enhanced market access for both goods and services exports,” Agrawal told PTI.

Although high tariffs imposed by the US, India’s largest trading partner and export destination, since August affected shipments to America in September and October 2025, exports to the US surged 22.61 per cent to USD 6.98 billion in November.

Exporters, however, remain cautious amid prevailing global uncertainties and are hopeful of an early conclusion of the proposed bilateral trade agreement with the US, as well as a trade deal with the European Union.

The World Trade Organization (WTO), taking note of worsening geopolitical conditions, has projected global trade growth of 2.4 per cent in 2025, while lowering the outlook for 2026 to 0.5 per cent.

“With higher tariffs now in place and trade policy still highly uncertain, frontloading of purchases is expected to unwind as accumulated inventories are drawn down and as GDP growth slows. Possible signs of weakness in trade and manufacturing output have been observed in developed economies, including reduced business and consumer confidence and slower growth in employment and incomes,” the WTO said.

The government said it remains optimistic that a series of measures will help exporters manage uncertainties and achieve healthy growth in 2026.

“The government continues to monitor India’s exports and take steps to promote them. It continues to work to mitigate the impact of the US tariff measures on Indian exports through a comprehensive multi-pronged strategy,” an official said.

Measures announced include a Rs 25,060 crore export promotion mission, extension of additional collateral-free credit facilities up to Rs 20,000 crore to eligible exporters, provision for a debt repayment moratorium and extension of tenor for export credit, and greater use of free trade agreements.

The NDA government has announced the highest number of FTAs in the past five years, including Mauritius (implemented in April 2021), Australia (December 2022), UAE (May 2022), Oman (signed in December), the UK (signed in July), EFTA (implemented in October), and New Zealand (talks concluded in December).

According to exporters and experts, India’s exports are expected to grow in 2026 despite global challenges, driven by rising competitiveness of domestic goods and services and diversification of products and markets.

Rudra Kumar Pandey, Partner at Shardul Amarchand Mangaldas & Co, said India’s export outlook for 2026 reflects structural shifts rather than a cyclical recovery in global trade.

“Electronics have emerged as a key driver, with exports rising nearly 39 per cent in November, reflecting sustained FDI-led capacity creation and deeper integration into global value chains,” Pandey said, adding that engineering goods, pharmaceuticals and automotive exports continue to support growth.

He also noted growing geographic diversification, with exports expanding beyond traditional markets such as the US and the UAE into Europe, East Asia and South Asia.

Shipments to the US rose around 22 per cent in November 2025 despite tariff pressures, while exports to Spain surged nearly 150 per cent, alongside strong growth to China and Bangladesh.

Federation of Indian Export Organisations Director General Ajay Sahai said global supply-chain realignments, expanding trade partnerships and improvements in India’s ease of doing business position exporters well to sustain momentum.

“With continued policy support and market diversification, we remain confident of a strong and stable export outlook in the coming year,” Sahai said.

He said the breadth of growth across engineering, electronics, pharmaceuticals, apparel, textiles, marine and services sectors reflects progress in diversification and value addition.

However, Sahai cautioned that exporters in 2026 are likely to face challenges, including geopolitical tensions and trade fragmentation.

“Slower growth in key developed markets may temper demand, while rising protectionism, including carbon-related measures and non-tariff barriers, will raise compliance costs. Exchange-rate volatility, high freight and insurance costs, and tighter global financing conditions could impact margins, especially for MSMEs,” he said.

The Indian rupee remained volatile in 2025, weakening by about 5 per cent during the year and trading around 90 to the dollar towards the end of December.