Page 35 - Policy & Economic Report - July 2025

POLICY AND ECONOMIC
ROEILPO&RGTAS MARKET

growth. This diversification has strengthened India's resilience by reducing dependence on traditional
merchandise exports.

The composition of merchandise exports has also undergone significant change, with engineering goods,
electronics, pharmaceuticals, chemicals and refined petroleum products emerging as key growth sectors.
Electronics, led by mobile phone exports, have witnessed particularly strong growth, reflecting the success
of domestic manufacturing initiatives and India's increasing participation in global value chains. At the
same time, traditional export categories such as gems and jewelry have experienced a gradual decline in
their share of total exports, indicating an ongoing shift towards higher value-added manufacturing.

Geographically, India's exports remain concentrated in a few major markets, highlighting the need for
greater diversification. The United States continues to be India's largest export destination, accounting
for nearly one-fifth of merchandise exports in FY 2025–26. While this has created significant market
opportunities, it has also increased India's exposure to changes in US trade policy and tariff measures.
Consequently, expanding exports to emerging markets and strengthening trade relations through Free
Trade Agreements (FTAs), local currency settlement mechanisms, and increased trade with BRICS+ and
other partner economies are expected to play an important role in sustaining export growth and reducing
concentration risks.

Looking ahead, India's export outlook remains favorable despite persistent global uncertainties.
Merchandise exports recorded a strong start during the first quarter of FY 2026–27, supported by robust
growth in engineering goods, electronics and petroleum products, while services exports continued to
demonstrate resilience. Continued improvements in manufacturing competitiveness, logistics
infrastructure, digital trade, product diversification and market access are expected to further strengthen
India's export performance. If the current growth momentum is sustained, India is well positioned to
achieve the US$1 trillion export milestone during FY 2026–27 or shortly thereafter, reinforcing the
country's role as an increasingly important participant in global trade.

9. World Bank raises India’s growth forecast from 6.3 to 6.6 percent for current financial year

The World Bank has raised India’s growth forecast from 6.3 percent to 6.6 percent for the current financial
year, owing to strong domestic demand and free trade agreements. World Bank expects India to remain
the primary engine of growth in South Asia.

The report said that, although the reduction in GST rates should continue to support consumer demand
in the first half of Financial Year 27, elevated global energy prices are expected to put upward pressure
on prices and constrain households’ disposable income.

The World Bank Group, in its twice-a-year regional outlook report, stated that the growth outlook is
driven primarily by India’s performance, underpinned by robust domestic demand as well as tariff cuts
and recent trade agreements, including the free trade agreement with the UK and European Union.

July 2026 Page | 34