Competition from China hurt India’s export growth than US tariffs: Axis Capital

A trade deal with the United States has been one of the main dampening factor for India's exports. The Indian market has seen considerable movements on reports of either a trade deal, or potential fresh rounds of tariffs. However, according to India Market Outlook 2026 report by Axis Capital, more that the US-India trade deal, one should worry more about the rising cost of capital globally, and the unending surge in Chinese exports.

According to the report, during September-October 2025, the two months under 50% US tariffs, India's exports fell 3% YoY (-10% YoY to the US). However, this export weakness was not solely due to US tariffs. The report said:

• Exports to the US are still adjusting to front-loading

• India’s marine exports, where the US share was 30% pre tariffs, grew 17% YoY

It said that certain regulatory easing such as the rollback of multiple quality control orders (QCOs) by four ministries on 114 intermediate products including plastic, chemicals, textile raw materials, and metals, has provided a tailwind to those sectors.

"While only 16% of the 355 HS6 codes affected by QCOs in end-2024 have seen relief, the reversal of the trend is encouraging," the report said. It added that the QCOs on finished goods aren't expected to end, given the threat of Chinese dumping in the domestic market and the rising use of industrial policies globally.

However, the Axis Capital report has reaffirmed that India will remain the fastest growing economy with 7.5% growth in FY27E driven by monetary easing, while the regulatory easing (ease of doing business, revoked QCOs, new labour codes) will boost growth over medium term.

"The incessant structural pressure of Chinese exports (to India’s export markets) and higher global capital costs are challenges, but not enough to derail growth," the report said.

The report has alos pointed out specific sectors that are under threat. They include chemicals, metals, textiles and intermediates (plastics, chemicals).

The chemicals sector is already facing a "steady pricing decline" due to "China-led low-cost imports". This has kept earnings growth "under tab" for bulk chemical companies. The metals (steel) sector is facing a "surge in low-priced imports" which has led to price undercutting. This has necessitated government intervention, with recommendations for 11-12% safeguard duty (SDD) to counter these imports and stabilise domestic pricing.

When it comes to textiles and intermediates (plastics, chemicals), the report said that Indian firms are struggling to compete in export markets because their input costs are too high to Chinese competitors. In response to the concerns of the sector, the Indian government revoked QCOs on 114 intermediary products including plastics, chemicals, and textile raw materials in November 2025.