Exports diversify, trade winds warm, India positions for advantage

The buoyancy in India’s trade talks with the US and others is palpable. And this clearly reaffirms India’s desire to come out of the highest (among Asian peers) tariff structure while enhancing capability building across several loops with recently concluded LPG deals and strategic defence deals last month bolstering the fair probability of a mutually amicable, fruitful negotiation.

The vexed Trump Tariff has certainly impacted India’s labour-intensive sectors such as textiles, jewellery and seafood, particularly shrimp – which operates with a lower margin. To support the exporters, the Centre has approved Rs45,060 crore, including Rs20,000 crore in credit guarantees on bank loans.

This is aimed to enhance the global competitiveness of Indian exporters and support diversification into new and emerging markets. By enabling collateral-free credit access under CGTMSE, it will be strengthening liquidity, as also ensures smooth business operations since the tariffs have led to a steep drop in container volume of shipments to the US.

In the face of all these, it is important to keep a close watch on what’s happening on ground. Picking up data from the Union Ministry of Commerce & Industry, SBI Economic Research Wing suggests that India’s total merchandise exports during FY26, Apr-Sep’25 inched up by 2.9 per cent to $220 bn ($214 bn in H1 FY25).

Cumulative exports to the US also registered growth of 13 per cent to $45 bn in FY26 Apr-Sep from $40bn in FY25 Apr-Sep though there could be some front loading effects to the aftermaths with September figures registering negative yoy growth of close to 12 per cent.

Furthermore, if we look at the share of the US in our exports, it has been declining since July 2025, moving down to 15 per cent in Sep’25, with marine products (15 per cent in Sep’25 from 20 per cent in FY25), precious, semi-precious stones (6 per cent in Sep from 37 per cent in FY25), RMG cotton (29 per cent in Sep from 34 per cent in FY25) and cotton fabrics, made up articles exports (31 per cent in Sep’25 from 39 per cent in FY25) leading the pack even though Marine products and RMG cotton witnessed positive growth during Apr-Sep’25.

Interestingly, share of India’s merchandise exports to other countries during this period has increased significantly indicating the diversification of our exports basket with UAE, China, Vietnam, Japan and Hong Kong, as also Bangladesh, Sri Lanka and Nigeria being among the top destinations (over FY25) across different product categories.

These facts and figures raise the obvious question: Was it because some destinations are now exporting more to the US after procuring from India? Consider these. Australia’s share in the US imports of pearls, precious, semi-precious stones has increased to 9 per cent YTD in Jan-Aug 2025 from 2 per cent during the same period in the previous year. Like that Hong Kong too registered increase in share from 1 per cent to 2 per cent to the US during the same period.

Meanwhile, when we look at the imports of these commodities by the US, August shows declining growth.

When it comes to BoP, India’s current account deficit (CAD) placed at 0.2 per cent of GDP in Q1 FY26, as against 0.9 per cent in Q1 FY25. This improvement in CAD was mainly owing to robust services exports and strong inflow of remittances. On the basis of these trends, SBI Economic Research wing expects India’s current account will be in deficit mode of nearly 1.8 oer cent/2.8 per cent of GDP in Q2/Q3 FY26 before it will turn

into positive side in Q4 FY26. For the complete fiscal (FY26), it expects an overall deficit in the range of 1.0-1.3 per cent of GDP.

Keeping all these in mind, economic analysts are of the view that even though BOP will turn negative in FY26, the alarm bells that are being sounded regarding its impact on rupee movements seems to be a little overblown at this point.