Wednesday, 14 Jan, 2026
Photo courtesy: Pixabay
New Delhi’s export base remains narrow and overly concentrated. With a small set of markets taking more than one-third of all shipments, even one downturn abroad triggers an immediate hit at home
India’s trade deficit hit a record in October, driven by slumping exports and a surge in imports. The numbers are unsettling not just for their size but for what they reveal: India’s export engine remains narrow, exposed and quick to falter when global conditions shift. A single policy move abroad can trigger huge damage at home, and that is exactly what has happened.
The US, long India’s most important export market, delivered the latest blow. President Donald Trump’s decision to impose 50 per cent tariffs on several Indian goods has led to a sharp fall in shipments for a second month. India’s exports to the US dropped 8.6 per cent in October. Overall merchandise exports fell nearly 12 per cent from a year earlier to $34.38 billion, an 11-month low. Imports moved the other way, rising more than 16 per cent to a historic $76.06 billion. The resulting gap—$41.68 billion—is the widest India has ever recorded.
A closer look shows gold imports made up a big share of the increase. They almost tripled to $14.7 billion, partly reflecting seasonal demand. But gold has long been a weak spot: whenever uncertainty rises, households turn to the metal as a safe store of value, pushing up imports at precisely the wrong time.
The deeper challenge, however, is structural. India’s export base remains too narrow and heavily dependent on a few markets. A small cluster of destinations accounts for more than one-third of India’s total shipments. When even one of them turns unfavourable, the impact is immediate. This time, the weakness is broad. Exports contracted not just to the US but also to the UAE, the UK and the Netherlands. The problem is not a single tariff shock—it is a wider cooling of demand in major economies.
India’s export mix adds another layer of vulnerability. Engineering goods, gems and jewellery, textiles, leather and metal components are highly sensitive to global cycles and buyer specifications. These are products that rely on stable orders from mature markets. Once demand weakens or regulations tighten, exporters struggle to redirect shipments elsewhere. The resulting loss of momentum spills quickly into the trade numbers.
Competitiveness also plays a part. Countries such as Vietnam, Mexico and China are more deeply integrated into global supply chains. Their logistics systems are faster and cheaper, their ports are more efficient and their supply networks more flexible. When global buyers shift orders, these countries adjust almost instantly. Indian exporters still contend with higher freight costs, slower transport and weaker linkages to global value chains. They lose market share more quickly in downturns and regain it more slowly in recovery.
New Delhi has tried to address some of these issues through trade agreements, but progress has been uneven. The recently concluded pacts with the UAE and Australia are useful but limited in scope. The UK agreement, signed earlier this year, is expected to come into force soon. Negotiations with Oman have wrapped up and are awaiting formal approval. Talks with the European Union—which has now overtaken the US as India’s largest export market after the tariff disruption—are in their final phase.
These deals matter because the government has set an ambitious target: reaching $1 trillion in exports by FY26. Export intensity has inched up over the years, from 19.8 per cent of GDP in 2015 to 21.2 per cent in 2024. But without broader market access and deeper integration into global supply chains, the numbers alone will not create resilience.
