Gradual recovery in developed markets, focus on key products boost export prospects for 2025

New Delhi: India's growing capabilities in high-value sectors like machinery and electronics are supporting the country's exports, amid global uncertainties caused by conflicts, and the gradual economic recovery in developed markets offers improved growth prospects for the Indian exporting community in 2025.

Trade experts suggest that if the new US administration imposes higher tariffs on China, Mexico, and Canada, Indian exporters could benefit further by seizing those opportunities.

They noted that the possible intervention of the new US administration under Donald Trump to end the Russia-Ukraine conflict could ease the Red Sea crisis, streamline global supply chains, and reduce shipping costs for traders.

However, Trump's threat for reciprocal tariffs on Indian goods may have an impact on the country's outbound shipments, as additional duties affect exporters' competitiveness.

The European Union's green regulations, including the Carbon Border Adjustment Mechanism (CBAM) and deforestation laws, also threaten to increase export costs and complicate free trade negotiations.

The commerce ministry is in the process of formulating a strategy to push exports of six key product categories, including engineering goods and electronics, to 20 focus countries including the US, Australia, France, China, Russia, the UK, Japan, South Korea, Singapore, and Indonesia.

During April-November this fiscal, exports increased by 2.17 per cent year-on-year to $284.31 billion despite global uncertainties, while imports rose by 8.35 per cent to $486.73 billion. Trade deficit, the difference between imports and exports widened to $202.42 billion from $170.98 billion during April-November 2023.

"We are already registering healthy growth rates in both goods and services and going by the current trend, the year 2025 will also see better growth prospects. New opportunities will come up for the Indian exporting community," Commerce Secretary Sunil Barthwal told PTI.

The secretary has expressed confidence that the country's goods and services exports may cross $800 billion in 2024-25. It was $778 billion in 2023-24.

A declining rupee value against the US dollar, focus on promoting e-commerce exports, and free trade agreements would also help the country register healthy growth in outbound shipments next year.

According to think tank Global Trade Research Initiative (GTRI), India's total exports, encompassing merchandise and services, are projected to exceed $814 billion in 2024, reflecting a 5.58 per cent growth compared to $768.5 billion in 2023.

Merchandise exports are expected to reach $441.5 billion, showing a modest 2.34 per cent increase over $431.4 billion in the previous year. In contrast, services exports demonstrate robust momentum, projected to grow by 10.31 per cent to $372.3 billion, up from $337.5 billion in 2023, GTRI said.

India's export landscape is undergoing a transformation that highlights both opportunities and vulnerabilities.

Sectors such as machinery and electronics are gaining prominence, with machinery's share in the export basket rising from 3.8 per cent in 2014 to 6.9 per cent in 2024, and electronics climbing from 3.3 per cent in 2014 to 7.9 per cent in 2024.

GTRI Founder Ajay Srivastava said that these trends underscore India's growing capabilities in higher-value sectors, a necessary shift for long-term export resilience.

Conversely, traditional sectors are witnessing a decline. Textiles and garments, which accounted for 21.1 per cent of exports in 2004, now represent just 8 per cent, while gems and jewellery have dropped from 16.9 per cent in 2004 to 7.5 per cent in 2024.

"These declines not only reflect changing global demand but also point to India's struggle to remain competitive in labour-intensive industries," Srivastava said, adding these sectors need targeted support to enhance quality, branding, and cost competitiveness.

India should also focus on its growing electronics sector by increasing local value addition and strengthening supply chains.

"Fixing the inverted duty structure and revising tariffs that hamper sectoral growth will help make Indian products more globally competitive. Simplifying customs procedures, improving ease of doing business, and fostering innovation are essential to boosting exports," he added.

Rumki Majumdar, Economist, Deloitte India, said that amid global uncertainties and rising trade protectionism, it becomes increasingly crucial for India to diversify its markets and product and service offerings.

"With the US emphasizing more manufacturing on its land, India can move up the services value chain and tap into the opportunities that arise due to the servicification of manufacturing. Of course, that would mean strengthening areas such as upskilling talent in the area of technology, addressing skill gaps, and having FTAs that address data privacy and data localization issues," Majumdar said.

The Geneva-based WTO (World Trade Organisation) has slashed the trade forecast for 2025 to 3 per cent from 3.3 per cent earlier.

Apex exporters' body FIEO said that it has formulated a strategy to boost India's exports to America, aiming to capitalise on potential opportunities that may arise as the US President-elect, Donald Trump, has threatened to impose high tariffs on Chinese goods.

As part of its plan, the body has urged the government to provide financial assistance for Indian exporters to participate in exhibitions across the US, FIEO (Federation of Indian Export Organisations) Vice President Israr Ahmed said.