Services exports emerge as India’s trade anchor; goods shipments slip in Q4FY26: NITI Aayog

India’s services exports came close to overtaking merchandise exports in FY2025-26, highlighting a structural shift in the country’s trade profile, even as merchandise exports declined during the March quarter, according to NITI Aayog’s latest Trade Watch Quarterly report.

The report released on Tuesday noted that services exports rose 9% year-on-year to $111.1 billion in the January-March quarter, generating a trade surplus of $60.4 billion. In comparison, merchandise exports fell 2.8% to $112 billion, while imports jumped nearly 12% to $195.6 billion.

“Services exports are fast catching up with merchandise exports,” the report said, noting that services exports reached $421 billion in FY26 against merchandise exports of $442 billion.

India’s overall trade remained resilient despite global uncertainties. Total trade expanded 5.4% during the quarter to $1.84 trillion, with exports growing 4.2% and imports rising 6.5%.

External sector supported by services surplus

The services sector continued to play a stabilising role for the external sector. According to the report, “Services exports remained a key pillar of external sector stability, with the services surplus rising from US$47.9 billion in Q1 to US$60.4 billion in Q4, helping offset the merchandise trade deficit.”

The merchandise trade deficit narrowed to $83.5 billion in the March quarter from $91.8 billion in the preceding quarter, making it the second-lowest quarterly deficit of FY26. The combined deficit in goods and services trade stood at $23.2 billion.

The report also highlighted India’s growing strength in global services trade. “India retained its position as the world’s eighth largest services exporter in 2025,” with exports rising from $156 billion in 2015 to $416 billion in 2025, reflecting a compound annual growth rate of 10.3%, significantly higher than the global average of 6.6%.

Trade basket shows mixed trends

India’s trade basket showed mixed trends during the quarter. Vehicle exports increased 14.2%, while iron and steel exports rose 18.4%. However, exports of natural and cultured pearls and precious stones declined sharply. On the import side, purchases of pearls and precious stones surged 82%, while imports of mineral fuels fell 11%.

The report also pointed to increasing diversification in India’s trade relationships. Export concentration among the top 10 destinations declined from 54.7% in the first quarter of FY26 to 50.4% in the fourth quarter, while import concentration fell from 62.2% to 55.2%.

Among key markets, exports to China, Hong Kong and Singapore registered strong growth, while shipments to the US and the UAE declined. On the import front, Switzerland recorded the sharpest growth of 48%, driven by higher purchases of gold, medical and scientific instruments, and engineering products.