India’s export engine lost steam in March, with goods shipments falling 7.4% year-on-year to $38.9 billion, according to a research report by Crisil. The decline marks a sharp reversal from the near-stable performance seen over the previous quarter and reflects both a high base and growing disruption linked to the West Asia conflict.

The strain is most visible in gems and jewellery, where exports dropped 29.3%. The UAE—now India’s largest market for the segment, ahead of the US—has seen sharp volatility in demand and routing.

Weakness, however, wasn’t confined to one pocket. Core exports fell 7.5%, pointing to broader pressure across manufacturing. Labour-intensive sectors continued to struggle: textiles declined 10.3%, readymade garments slipped 19%, and leather exports fell 14.4%.

Even electronics, which had been a rare bright spot, contracted 3.3%, its first decline in 30 months, as per the research report by the aforementioned ratings agency.

Oil trade swings as crude prices reshape flows

Energy trade moved in the opposite direction. Petroleum exports rose 5.7%, helped by higher global crude prices, with Brent averaging $95.6 per barrel in March versus $70.7 a year ago. Some shipments also appear to have been redirected to Asian markets, with exports to Singapore surging 158.6% and Malaysia up 84.5%.

Imports told a different story. Crude purchases fell sharply, dragging overall imports down 6.5% to $59.6 billion. The result: India’s oil trade deficit nearly halved to $7 billion, compared with $14.1 billion a year earlier.

West Asia corridors under pressure

Trade links with West Asia showed visible strain. Exports to Saudi Arabia fell 45.7%, while those to the UAE dropped 61.9%. On the import side, inflows from Qatar, Saudi Arabia and the UAE contracted sharply, reflecting disrupted supply chains and softer commodity flows.

Agricultural exports also felt the impact. Rice shipments fell 15.4%, underscoring logistics challenges in a region that absorbs a large share of India’s staples.

Outlook: external risks remain in focus

For FY26 so far, exports are up just 0.9% to $441.8 billion, while imports have climbed 7.4% to $774.9 billion, widening the trade deficit to $333.1 billion.

Crisil cautions that the current account deficit could widen to 1.5% of GDP in FY27, and potentially 2% if oil prices remain elevated. Services exports continue to provide a cushion, but geopolitical risk and energy volatility are clearly back in focus for India’s external balance.