Don't rejoice at surging exports as they mask rising import dependence, says GTRI

The 17.9% growth in India’s goods exports in the first five months of the current financial year (April–August 2026) needs to be seen in context, as the period was also marked by high dependence on imported inputs, falling shipments from job intensive sectors, widening trade deficits with China and Russia, and rising costs from a weaker rupee, says Delhi based think tank Global Trade Research Initiative (GTRI).

In an analysis of the official export-import data released by the Department of Commerce on September 15, GTRI notes the strong headline export growth masks five key trends.

“India’s merchandise exports rose 17.9%, from $183.2 billion to $215.9 billion. This is welcome, but much of the increase appears to reflect higher commodity prices and growth in import-dependent products, rather than a broad rise in export volumes or domestic value addition. Petroleum-product exports increased by $10 billion, imports of crude oil and petroleum rose by $17.6 billion; electronics exports grew by $7.6 billion, but electronics imports jumped by $20.2 billion. Engineering exports also benefited partly from higher prices of metals, ores and minerals”, Ajay Srivastava, founder, GTRI, notes.

The second trend identified by GTRI was the decline in the export of several goods produced by agricultural and labour-intensive industries that support millions of farmers, workers and small businesses. “Tea exports declined by 15.5%, tobacco by 7.8%, spices by 7.4%, and fruits and vegetables by 10.3%. Among labour-intensive goods, ready-made garments fell by 9.1%, leather products by 4.3%, and ceramics and glassware by 21.6%. Marine products, up 14.3%, were the main exception”, Srivastava points out.

The think-tank also highlights India’s increasing dependence on Chinese imports. “Imports from China rose 27% to $65.5 billion. If this pace continues, they could exceed $157 billion in FY2027, taking India’s bilateral deficit to about $134 billion. These projections could change with prices and trade flows during the rest of the year, but they show the need for a focused strategy to strengthen domestic manufacturing and increase exports to China”, Srivastava said.

The fourth trend is 56.7% growth in imports from Russia to $41.1 billion in the first five months of FY2027. “At this pace, they could approach $100 billion for the full year, leaving India with a bilateral deficit of about $94 billion. Discounted Russian oil may save India foreign exchange, but India also needs a plan to expand exports to Russia”, GTRI founder suggests.

He also points out that the rupee’s depreciation makes trade growth look much stronger in domestic-currency terms. “Exports rose 17.9% in dollars but 30.3% in rupees, while imports increased 18.2% in dollars and 30.6% in rupees. A weaker currency can make Indian goods more competitive abroad, but the benefit is limited because leading exports such as petroleum products and electronics rely heavily on imported inputs. Depreciation makes these inputs more expensive, reducing exporters’ gains while raising India’s overall import bill”, Srivastava said.

India needs to focus on expanding domestic value addition, restoring competitiveness in labour-intensive industries, and pursuing targeted export strategies for its largest sources of imports, he added.