Trade tariffs, supply chain disruptions, sanctions and currency fluctuations defined the nature of global trade in general in2025. India’s exports and imports were no exception.

India was among the worst hit in terms of high tariffs slapped by the country’s biggest trade partner, the United States, during the year. The domestic industry was hit by the supply disruptions in the critical mineral segment triggered by its largest import source China, the country was penalized for sourcing oil from Russia through secondary tariffs by the US and Rupee was amongst the currencies that depreciated the most against US dollar during the year.

However, it is increasingly becoming clear that despite all the headwinds in 2025, the damage to India’s external trade was limited.

The data so far for the current financial year 2025-26 shows that even after the imposition of 50% extra tariff by the US on imports from India that country remained India’s top export destination during April–November 2025. Also, the rupee depreciation, in spite of its impact on imports and trade deficit, helped Indian exporters to remain competitive, thereby cushioning the damage of high tariffs, to some extent, during the year. As Rajesh Agrawal, Commerce Secretary, notes, ‘despite persistent global uncertainties, supply chain disruptions, and geopolitical challenges, India has maintained a strong and resilient export performance’.

During April-November 2025, the cumulative value of merchandise exports increased 2.62%, to $ 292.07 billion, up from $ 284.60 billion registered during the same period the previous year. The fact that the increase was higher in non-petroleum exports ($ 254.08 billion, 5.86% higher than $ 240.02 billion) during this period was indicative of India’s ‘resilience’. Overall, sustained growth in services exports where external shocks were less helped, as cumulative exports (merchandise & services) during April-November 2025 touched $ 562.13 billion, a 5.43% increase as compared to $ 533.16 billion in April-November 2024.

The resilience during the first eight months of FY26 also means that for the whole year, Indian exports will remain in the positive territory, however small the growth is.

“India’s total exports reached about $825 billion in FY25, split between $438 billion in merchandise and $387 billion in services. In FY26, goods exports are likely to stay broadly flat, squeezed by weak global demand and renewed U.S. tariff pressure, while services exports may inch past $400 billion. That would lift total exports to roughly $850 billion—well short of the government’s $1 trillion ambition, which now looks more aspirational than realistic in a slowing, protectionist global economy”, says Ajay Srivastava, founder of Delhi based think tank Global Trade Research Initiative (GTRI).

What is encouraging is that 2026, as well as FY27, looks quite promising compared to the current year.

“We feel the worst for India’s exports is over. We are all set to improve from here,” says Ajay Sahai, director general and CEO of Federation of Indian Export Organisations (FIEO).

Incidentally, the potential growth in 2026 has a lot to do with the groundwork that has gone in 2025 especially the free trade agreements (FTA) that are expected to turn operational in FY27.

FTA Factor

Over the past four years, India has concluded six free-trade agreements—with Mauritius, the United Arab Emirates, European Free Trade Association countries, Indo-Pacific Economic Framework members, the United Kingdom, Oman and New Zealand—taking the number of India’s comprehensive FTAs to 18. Interestingly, three of these, UK, Oman and New Zealand, happened in 2025, with the last two getting signed only a few weeks back. Once operational, UK will eliminate import duties on 99% of goods exported from India. In the case of New Zealand and Oman too, India will gain duty free access for 98-100% goods exports. All three has tremendous potential to boost India’s trade growth in FY27.

“In 2026, India may add more heavyweight partners, with trade talks underway or contemplated with the United States, the European Union, Russia and Mexico. If concluded, India would have trade agreements with virtually every major economy—except China, where it remains bound only by the limited tariff-concession framework of the Asia-Pacific Trade Agreement”, a GTRI analysis points out.

“EU is a large market for Indian exports, as big as the US market. Tariff as expected to scale down in the US also in 2026. It will help the exports”, Sahai says.

Another export booster, which has already started yielding result, is the Production Linked Incentive (PLI) scheme. “Some of the exports are definitely propelled by the PLI scheme. Electrical, electronics, machinery, automobiles and auto components, are benefiting out of PLI. In pharma, the investments have flown in; it will take some time for the impact to be seen. In the next 2-3 years, pharma could also contribute,” Sahai points out.

The commerce ministry is also betting on diversification and technological depth of India’s export basket to drive strong growth across sectors such as electronics, engineering goods, pharmaceuticals, IT services, petroleum products, agriculture, and processed foods in 2026.

According to commerce secretary Agrawal, the FTAs concluded with the UAE, Australia, the UK, Oman and New Zealand, and the significant progress in negotiations with the European Union, United States, Israel, Chile, Peru, and the Eurasian Economic Union are all positive signals for India’s growth story in global trade.

GTRI’s Srivastava says the challenge now is not signing more deals, but making existing ones work. “India must urgently review the performance of its FTAs—sector by sector—to ensure they are actually expanding exports, integrating Indian firms into global value chains, and delivering measurable trade gains rather than remaining under-utilised diplomatic trophies. With limited influence over geopolitics, India’s 2026 strategy must turn inward. Export growth will depend on upgrading product quality, moving up the value chain, and lowering costs,” he says. Operationalising the Export Promotion Mission, simplifying regulation, and improving ease of doing business are essential if India’s exports will also help a great deal, he adds.

“In 2026, India’s trade performance will be decided less by external opportunities and more by domestic execution. With tariffs rising, climate taxes kicking in and geopolitics in flux, export survival—and any growth—will hinge on competitiveness at home: better products, deeper manufacturing, lower costs and effective use of trade agreements” Srivastava says.

Trade engagements

2026 Outlook: FTA-powered India will look for bigger trade engagement globally this year