India’s export market has undergone a visible rebalancing in recent months, reflecting a strategic response to tariff-related uncertainties and evolving global trade dynamics. India has reduced its dependence on the United States while expanding its presence across West Asia, Asia and select emerging markets. In the post-tariff phase, Indian exporters have adapted by redirecting shipments and diversifying markets to reduce vulnerability to policy shocks in any single geography.
The share of the United States in India’s export basket declined from 22.5 percent in the pre-tariff period to 17.8 percent in the post-tariff phase. In contrast, exports to markets such as the UAE, China, Saudi Arabia, Spain and Hong Kong recorded notable gains. This trend indicates effective trade redirection and market substitution, suggesting that Indian exporters are becoming more agile in navigating geopolitical and trade policy disruptions.
Merchandise Trade Deficit Widens Marginally
Against this backdrop, India’s merchandise trade data for December presents a mixed picture. The merchandise trade deficit widened marginally to $25.04 billion, compared with $24.53 billion in November, as imports rose faster than exports. Goods exports increased to $38.51 billion in December from $38.13 billion in the previous month, while imports climbed to $63.55 billion from $62.66 billion.
On a year-on-year basis, merchandise exports grew by 1.9 per cent, while imports rose a sharper 8.8 percent. This divergence reflects firm domestic demand and the impact of global commodity prices, even as export growth remains moderate due to subdued external demand in some advanced economices.
Sectoral Drivers of Export Growth
Export performance in December 2025 was supported by a mix of manufacturing and agri-based sectors. Electronic goods emerged as a key growth driver, rising 16.8 per cent to $4.2 billion, underscoring India’s strengthening role in global electronics supply chains. Meat , diary and poultry product exports surged 30.5 percent to $0.7 billion, while marine product exports increased 11.7 per cent to $0.8 billion, reflecting stable global demand for food products.
Pharmaceutical exports rose 5.7 percent to $2.63 billion, reinforcing India’s position as a major supplier of affordable medicines. Engineering goods, the largest export category , edged up 1.3 per cent to nearly $11 billion, pointing to steady but restrained global industrial activity.
Import Trends and Commodity Impact
On the import side, trends were mixed. Gold imports declined 12.1 percent to $4.13 billion, due to moderated demand on high prices. In contrast, petroleum imports rose nearly 6 per cent to $14.41 billion, highlighting India’s continued dependence on energy imports and sensitivity to global oil prices.
Services Trade and Overall Outlook
Services trade continued to provide a critical cushion to India’s external account. Services exports in December were estimated at $35.50 billion, while imports stood at $17.38 billion, resulting in a surplus of $18.12 billion. Including services, overall exports in December reached $74.01 billion, while imports rose to $80.94 billion.
Cumulatively, exports of merchandise and services during April-December 2025 are estimated at $634.26 billion, compared with $607.93 billion a year earlier, marking growth at 4.33 percent. Overall exports for FY26 are expected to cross $850 billion.
Trade Talks and Strategic Balance
Despite a reduced share of the U.S. in India’s export basket, merchandise exports to the U.S. still grew 9.8 percent year-on-year during April-December FY26. However, the commerce secretary has indicated that while talks with the U.S. are progressing, no firm timeline can be set for a trade deal. India’s evolving export strategy thus reflects greater diversification, resilience and balance amid ongoing global trade uncertaininty.
Source: Wise Money
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