India’s imports rise to $0.99 trillion in FY26, but fall to 25% of GDP from FY13 peak: EY Economy Watch

Even though India’s imports nearly touched the $1-trillion benchmark ($0.99 trillion) in FY26), as percent of GDP, it has fallen to close to 25% after touching a peak of nearly 33% in FY12 and FY13, reflecting a reduction in the degree of import dependence and success of import substitution, D.K. Srivastava, chief policy adviser, EY India, has said in his latest ‘Economy Watch’ brief. Given the large share of China in India’s non-oil imports, India could consider promoting trade with China in terms of local currencies, at least partially, he says.

According to him, although the trade imbalance considering goods and services together has been quite large, peaking in FY13 at more than 7% of GDP, this imbalance has fallen since then to less than 3% of GDP. Services sector trade surplus and benign oil prices can lead to India reaching a position of near balance on its trade account, he noted.

Economy Watch proposed a distinction in the context of import substitution between resource-based imports such as crude oil and gold, capital goods imports such as machinery, intermediate inputs used in domestic manufacturing and exports, and consumption-oriented imports. While crude oil, coking coal and several minerals are constrained by domestic resource availability, especially in the near term, sectors such as electronics, machinery, chemicals, and specialised industrial inputs are sectors where investment and manufacturing within India may be aggressively promoted with a view to reducing import dependence, increasing domestic value added and generating employment within India, it says. These sectors are also crucial for enhancing India’s technological capabilities, it adds. 

Srivastava acknowledges the government’s efforts to embark upon a policy of targeted import substitution where identified items’ can contribute to $189 billion in terms of savings in import costs. Stating that just four commodities — crude, electronic goods, gold, and machinery — accounted for 46-55% of total merchandise imports and six countries accounted for little less than 50% of total merchandise imports, the August issue of  'Economy Watch' focused on the structure of the country’s imports and potential for import substitution.

Between imports of goods and imports of services, the share of goods imports is much larger than that of services. In terms of both commodities and sources, there is considerable concentration in India’s imports. While China is India’s major source of imports for non-oil commodities, UAE, Russia, Saudi Arabia and Iraq were key import sources for oil. US supplies both oil and non-oil products to India.

“Going forward, reducing India’s import dependence on crude oil may take longer but its import dependence on electronic components, API for pharmaceuticals, critical minerals and advance manufacturing inputs may be pursued at a much faster pace through suitable policies and additional investment, emphasis on R&D, etc.," Srivastava notes.