The India story: Striving for a stronger share of the global trade pie

India's trade relations with the world have evolved in the last 25 years. New partnerships have been forged, old ones have been strengthened, but challenges remain

Since the beginning of this millennium, India's trade landscape has transformed, with both exports and imports of goods surging by over 12 and 15 times, respectively. This growth has been driven not only by a diversification of product categories but also by an expansion into new geographies, reshaping India’s global trade footprint.

  For more than two decades now, the United States has held an unshakeable position as India’s top trade partner. Since 1999-2000, the US has consistently been India's largest trade partner, the primary destination for exports, and among the top five import sources. 

  China, which was India’s 16th largest trade partner at the turn of the century, is now its second largest, besides being its largest import source.

  Alongside the US, European countries such as Germany, Belgium, and the United Kingdom were India’s traditional export markets. However, from 1999-2000 onwards, India’s trade ties with other regions began to strengthen. Exports to Asia, West Asia, and Africa, particularly to nations like China, Singapore, the United Arab Emirates (UAE), and Japan, gained prominence. 

  According to the Economic Survey 2023-24, the combined share of developing regions — Asia and Africa — in India's total exports rose from 42.9 per cent in 1999-2000 (FY2000) to 52 per cent in FY24. The UAE, Singapore, China, Russia, and Australia have emerged as major export partners. The survey also highlighted that the share of India’s top 10 export destinations fell from 61.9 per cent in FY2000 to 50.5 per cent in FY2024, signalling the broadening of India’s export base. 

  Despite this diversification, India's merchandise imports have outpaced exports in terms of both value and global share over the last 24 years. Exports grew  elevenfold in value, and the share of Indian exports in global trade more than doubled. But closer scrutiny of the data shows that over the last 13 years, from 2010 to 2023, India's export share saw only modest growth, rising from 1.5 per cent to 1.8 per cent. 

  Arpita Mukherjee, a professor at the Indian Council for Research on International Economic Relations, said that despite efforts to diversify, India's share in world trade has more or less stagnated over the past decade. “India's total share in global trade remains low, although export growth has been strong, particularly since the pandemic,” she said. “This could mean that India is losing market share in some of the traditional export items such as apparels, gems and jewellery, and leather.” 

One example is India's yellow gold jewellery exports, where Turkey has captured the Italian market, leaving India behind. “This isn’t necessarily due to issues with Indian products, but because of how other countries have made their policies more conducive to boost growth,” Mukherjee said.

  Trade experts point out that while India has achieved some product diversification in its export basket, traditional strengths like textiles and agriculture are facing stiff competition from countries like Vietnam. 

  Historically, India’s exports were dominated by industrial products — chemicals, gems and jewellery, textiles, and leather. Over the last two decades, however, new products such as automobiles, pharmaceuticals, and, more recently, electronics like smartphones have found a place in India’s export portfolio. 

  Smartphone exports, in particular, have surged, driven by the launch of the production-linked scheme in 2020. In FY24, smartphone exports grew to $5.5 billion, a 158 per cent jump from $2.1 billion the previous year. 

 

  Challenges & the way forward

  Ajay Srivastava, a former trade ministry official and founder of the Global Trade Research Initiative (GTRI), believes India’s export competitiveness is hampered by high energy and financing costs, inefficient logistics, and rigid labour laws. He suggests that reforms in these areas, along with boosting domestic production of critical inputs, are crucial for India to compete effectively on the global stage.

  Besides, the economic growth of large economies such as India, China, and the US is not export driven. Exports make up a significant portion of GDP in smaller economies — Vietnam (93 per cent) and Singapore (174 per cent) — but also leave them vulnerable to global economic instability, he explained. In contrast, larger economies have a much smaller share of exports in their GDP: the US (11.6 per cent), China (19.7 per cent), Japan (20.5 per cent), and India (21.9 per cent).

  India, like other large economies, follows an open trade policy, signs balanced Free Trade Agreements (FTAs), restricts unfair imports and has a healthy mix of domestic champions and MNCs, Srivastava said. “While export remains a priority, it is not pursued at the expense of other sectors. The focus is on organic economic growth,” he added.

  Looking ahead, the Indian government has set an ambitious target of achieving $1 trillion in merchandise exports by 2030, up from $437 billion in FY24. To meet this goal, the commerce department is focusing on 20 key countries, including Australia, France, Germany, China, Russia, Turkey, the UK, Japan, South Korea, Brazil, Singapore, and Vietnam, which together account for 60 per cent of global imports.

  India has also identified six key sectors — engineering goods, electronics, chemicals and plastics, pharmaceuticals, agriculture and allied products, and textiles — that represent 67 per cent of global imports. The aim is to deepen economic ties with these focus countries through balanced trade agreements, increased market access, and addressing the non-trade barriers India has been facing in these countries, a senior government official told Business Standard.

  To boost exports in the remaining months of this fiscal year, the focus will be on developing strategies for commodities where India has a comparative advantage,” the official said. Srivastava also highlighted the need for the country to shift from assembly-based exports to deep manufacturing to unlock its full trade potential. 

  As India enters the next phase of its trade journey, overcoming these challenges will be crucial.