India’s $1 Trillion Export Dream in Trouble as Global Demand Weakens

India’s ambitious goal of exporting $1 trillion worth of goods and services by the end of FY26 may not be achievable on schedule, according to a fresh report by the Global Trade Research Initiative (GTRI). The key reason: sluggish global demand, rising protectionism, and mounting trade barriers in major markets.

GTRI founder Ajay Shrivastava said India’s exports are likely to see almost no growth this year, especially in merchandise shipments. While services exports continue to perform well, they alone may not be enough to bridge the gap.

FY26 Exports May Fall Short by $150 Billion

The report estimates that India’s total exports in FY26 may reach around $850 billion, falling short of the $1 trillion target by nearly $150 billion.

• Goods exports: Expected to remain flat
• Services exports: Likely to cross $400 billion, offering the only strong support to overall trade growth

“Services are currently the only meaningful growth cushion for India’s trade,” Shrivastava noted, adding that weak global conditions continue to weigh heavily on merchandise exports.

Trade Deals Could Change the Game — But Not Immediately

Shrivastava believes the $1 trillion target could still be achieved if India finalises major trade agreements, particularly with the United States and the European Union.

“That may happen once the US and EU trade deals are concluded — possibly next year, not this year,” he said.

Despite export-related challenges, he stressed that India’s domestic economy remains stable, supported by steady GDP growth and low inflation. However, continued pressure on exports could limit overall economic momentum.

US and EU Trade: Two Different Challenges

India’s trade performance with its two biggest Western partners shows contrasting trends:

🇺🇸 United States

• Exports to the US fell sharply between May and November
• Shipments declined by nearly 21%
• The drop followed the imposition of steep tariffs under President Donald Trump’s trade policies

Unless Washington rolls back the additional duties or signs a trade deal with India, exports to the US — India’s largest market — could weaken further, the report warned.

🇪🇺 European Union

India’s exports to the EU dropped by around 24%, even before new duties came into force. The decline is largely attributed to:

• Stricter compliance and reporting norms
• Rising regulatory costs for exporters

From January 1, 2026, the EU will activate its Carbon Border Adjustment Mechanism (CBAM), effectively adding a carbon tax on imports. Indian goods will begin reflecting CBAM-related costs in 2026, with payments settled in 2027.

India Is Slowly Diversifying Export Markets

There is some positive news. While exports to the US fell, shipments to other regions increased by about 5.5%, indicating early signs of geographical diversification.

“This shows diversification has already started — even if only in a small way,” Shrivastava said.

However, he cautioned that simply finding new markets isn’t enough.

Export Basket Needs a Major Upgrade

According to GTRI, India must also diversify what it exports, not just where it exports.

• Greater focus needed on medium- and high-technology products
• Strong potential seen in electronics, engineering goods and textiles
• Higher value addition is crucial to survive in a hostile global trade environment

India has already signed 18 Free Trade Agreements (FTAs), with more expected in 2026. But the priority now should shift from signing deals to making FTAs actually deliver export growth.

What Should Be India’s Export Strategy for 2026?

With limited control over global geopolitics, India’s export push must focus inward. GTRI suggests the following priorities:

• Improve product quality and competitiveness
• Strengthen value chains and manufacturing depth
• Reduce production and logistics costs
• Effectively use existing trade agreements
• Speed up implementation of export-related schemes
• Simplify regulations and improve ease of doing business
• Operationalise the Export Promotion Mission with urgency

The think tank warned that tariffs, climate-related taxes and geopolitical uncertainty will continue to challenge global trade.

Bottom Line

India’s export growth in the coming years will depend less on global conditions and more on domestic competitiveness — better products, deeper manufacturing capabilities, and lower costs.

In FY25, India’s total exports stood at $825 billion, including:

• $438 billion in merchandise exports
• $387 billion in services exports

Crossing the $1 trillion mark may take longer than hoped — but with the right strategy, the foundation for sustainable export growth can still be laid.