Comrades Editorial · 20 Oct 2026 (PDF)
In this edition
- Strengthening India’s Global Export Competitiveness Economic Scenario
Economic Scenario
Strengthening India’s Global Export Competitiveness
Source This editorial is based on “Exports surge paves the way for much-needed reforms” published in The Indian Express on 17/10/2026. The article highlights that India must leverage export growth to advance structural reforms, strengthen MSMEs, improve logistics, increase domestic value addition and diversify markets to sustain competitiveness amid global uncertainties. Driven by engineering, electronics, and knowledge-intensive services, India’s merchandise exports reached USD 44.4 billion in September 2026, pushing first-half exports to approximately USD 260 billion. The Finance Minister highlighted the Economic Survey 2025–26’s progression from ‘Swadeshi’ to ‘Strategic Resilience’ to ‘Strategic Indispensability’, envisioning a shift from “thinking about buying Indian” to “buying Indian without thinking.” However, low domestic value addition, trade deficits with China, currency volatility, and carbon-compliance rules threaten competitiveness. Sustaining export momentum requires structural reforms, input-tariff rationalisation, and a transition from basic assembly to high-value manufacturing. What are Key Developments in India’s Export Sector?- Record Export Earnings and Stronger Merchandise Growth:
- India’s export sector has expanded through the combined contribution of manufacturing and services.
- Total exports reached a record USD 863 billion in FY2025–26, comprising USD 442 billion in merchandise and USD 421 billion in services.
- Momentum continued during April–September 2026, when combined exports were estimated at USD 476.20 billion, up 13.84% year-on-year, while merchandise exports increased 18.51%.
- Expansion of Knowledge-Intensive and Business Services Exports:
- India’s services exports increasingly combine digital delivery, professional expertise and business support.
- RBI figures reported by the Commerce Ministry show that telecommunications, computer and information services generated USD 206.6 billion in FY2025–26, accounting for 49% of services exports.
- Business services contributed USD 124.2 billion, up from USD 107.2 billion in FY2024–25.
- Together, these segments demonstrate the importance of remotely delivered services and specialised business capabilities to India’s export competitiveness.
- Emergence of Semiconductor Devices and Packaged-Chip Exports:
- India is strengthening its participation in global semiconductor value chains, including through assembly, testing and packaging.
- For example, Kaynes Semicon’s Sanand facility supplies Intelligent Power Modules to a California-based company, with a substantial share of its output booked for export.
- By September 2026, five commercial semiconductor units were operational, including Micron, Kaynes, CG Semi, CDIL and Suchi Semicon.
- These developments diversify India’s technology exports and build manufacturing capabilities, while distinguishing chips packaged in India from those fabricated domestically from wafers.
- Electronics and Mobile Phones Becoming Major Export Engines:
- India’s export basket is gaining a larger electronics manufacturing component, supported by the Production Linked Incentive scheme, manufacturing clusters and supplier investment.
- Electronics exports reached approximately ₹4.24 lakh crore in FY2025–26, including ₹2.59 lakh crore in mobile-phone exports.
- This development strengthens India’s participation in global value chains, creating opportunities for component suppliers, assembly firms and logistics providers.
- Defence Exports Emerging as a Strategic Manufacturing Segment:
- India is expanding its presence in international markets for defence equipment, systems, subsystems and components.
- Defence exports reached around ₹38,000 crore in FY2025–26, an increase of approximately 63% over the preceding year. Private firms contributed ₹17,000 crore, while Defence Public Sector Undertakings contributed ₹21,000 crore.
- Indian defence products reached more than 80 countries, and the number of exporters increased from 128 to 145, indicating broader participation in this specialised export ecosystem.
- Movement Towards Higher-Value Pharmaceuticals and Medical Devices:
- India’s healthcare exports are developing beyond conventional generics towards complex generics, biosimilars and sophisticated medical technologies.
- The Economic Survey 2025–26 identified this transition towards greater value and innovation. Medical-device exports increased from USD 2.5 billion in FY 2020–21 to USD 4.1 billion in FY2024–25, reaching 187 countries.
- Domestic manufacturing now includes equipment such as MRI and CT scanners, cardiac stents and ventilators, illustrating the industrial capabilities supporting further export diversification.
- Deeper Product Diversification in Existing Export Markets:
- Export expansion increasingly involves selling a wider range of products within established markets.
- For example, the number of HS eight-digit product lines exported to the UAE increased from 7,546 in FY2021–22 to 8,053 in FY2025–26, adding 507 product lines.
- Under the India–UAE CEPA, approximately 4.45 lakh Certificates of Origin had been issued by July 2026.
- New Trade Agreements Expanding Preferential Market Access:
- India’s expanding FTA network is opening additional opportunities for exporters through tariff concessions and regulatory cooperation.
- The India–Oman CEPA, effective from June 2026, provides duty-free access covering 99.38% of Indian exports by value. Meanwhile, the India–New Zealand FTA is scheduled to enter into force in October 2026, providing duty-free access across all New Zealand tariff lines for Indian originating exports.
- Potential beneficiaries include textiles, footwear, engineering goods and processed foods.
- Integrated Export Support for MSMEs and E-Commerce Businesses:
- The Export Promotion Mission, with an outlay of ₹25,060 crore for FY2025–26 to FY2030–31, combines financial assistance under Niryat Protsahan with market-readiness support under Niryat Disha. By February 2026, 10 interventions were operational.
- Examples include TRACE (Trade Regulations, Accreditation and Compliance Enablement), which supports eligible international testing and certification expenses, and the FLOW (Facilitating Logistics, Overseas Warehousing and Fulfilment) scheme, which assists overseas warehousing and fulfilment. This approach addresses practical barriers faced by smaller exporters like working capital, standards compliance, logistics and access to foreign buyers.
- Rising Protectionism and Unpredictable Market Access:
- Frequent changes in tariffs, trade investigations and product exemptions make export pricing and long-term contracts difficult.
- For example, the July 2026 US Section 301 measures imposed an additional 10% duty on covered Indian products. The Commerce Ministry estimated that 55% of India’s exports to the US would face this duty, while approximately 45% remained exempt.
- Such differentiated treatment complicates sourcing decisions and can force exporters to absorb part of the tariff through lower margins to retain buyers.
- Geopolitical Disruptions and Uncertain Shipping Costs:
- Dependence on vulnerable maritime routes exposes exporters to vessel diversions, freight surcharges, higher insurance premiums and delivery delays.
- In March 2026, the government documented disruptions around the Strait of Hormuz and the wider West Asian corridor, including congestion at transshipment hubs. It approved the ₹497-crore RELIEF scheme to address extraordinary freight and war-related risks.
- These disruptions particularly threaten perishable cargo and time-sensitive orders, while longer transit periods lock exporters’ working capital into goods awaiting delivery.
- Carbon-Compliance Costs and Unequal Exposure to Green Trade Rules:
- The EU’s Carbon Border Adjustment Mechanism (CBAM) links market access increasingly to embedded emissions, verified production data and carbon costs.
- Its definitive regime began in January 2026, covering specified products such as steel, aluminium, cement and fertilisers.
- A June 2026 study in Nature Climate Change found that higher-emission Indian steel firms reduced EU export quantities and revenues during the reporting phase, while lower-emission firms maintained exports. This indicates that competitiveness increasingly depends on production-level decarbonisation capabilities.
- Limited Domestic Value Addition and Imported-Input Dependence:
- Growth in gross exports does not automatically translate into equivalent growth in domestic income, technological capability or supplier development.
- An April 2026 Ministry of Electronics and Information Technology (MeitY) statement, citing industry estimates, placed domestic value addition in electronics manufacturing at 18–20%.
- Dependence on imported components leaves manufacturers exposed to exchange-rate movements, overseas supply interruptions and component-price increases.
- Consequently, a weaker rupee can raise input costs, limiting the net benefit for firms operating mainly in assembly-intensive segments.
- Restricted Export Finance and Working-Capital Stress for MSMEs:
- Smaller exporters must finance production, certification and shipment well before receiving payment, making affordable pre-shipment and post-shipment credit essential.
- In its July 2026 Board of Trade submission, the Federation of Indian Export Organisations (FIEO) flagged a nearly 14% contraction in export credit under priority-sector lending in the recent period.
- Credit constraints can prevent otherwise competitive MSMEs from accepting larger orders or offering buyers commercially attractive payment terms.
- Uneven Performance in Employment-Intensive Traditional Exports:
- Aggregate export growth can conceal weakness in sectors supporting substantial employment and artisan livelihoods.
- Provisional Ministry of Commerce and Industry data show that cotton-textile exports declined from ₹1.04 lakh crore in FY2024–25 to ₹1.02 lakh crore in FY2025–26, while carpet exports fell from around ₹13,000 crore to ₹12,880 crore.
- Parliamentary recommendations in August 2026 also highlighted stagnation in traditional exports and the need for technology upgrading and designs aligned with consumer preferences.
- The concern is that export expansion may generate uneven employment benefits unless established labour-intensive industries remain competitive.
- Quality-Control Failures and Risks to Export Credibility:
- Weaknesses in manufacturing quality, testing, documentation and traceability can trigger shipment detention, import restrictions and costly corrective action.
- For example, the US FDA’s March 2026 warning letter to Flowchem Pharma in Andhra Pradesh identified significant deviations from Good Manufacturing Practice (GMP) for active pharmaceutical ingredients.
- It recorded that the firm’s drugs had been placed on Import Alert 66-40 in January 2026.
- Such firm-specific failures demonstrate how compliance shortcomings can interrupt market access and undermine buyer confidence even where demand remains strong.
- Concentration of Services Exports and Cross-Border Regulatory Risks:
- India’s services-export strength remains heavily exposed to a limited group of overseas markets.
- The Economic Survey 2025–26 reported that the US accounted for 52.9% of software-services exports in FY2024–25, while Europe accounted for 32.8%—together approximately 85.7%.
- This concentration increases exposure to those markets’ technology-spending cycles and regulatory changes.
- Strategic Green Hydrogen and Low-Carbon Export Corridors:
- Proactively insulating heavy manufacturing (steel, aluminum, fertilizers, and chemicals) against international green protectionism—such as the EU/UK Carbon Border Adjustment Mechanisms (CBAM)—requires establishing Zero-Carbon Industrial Export Zones (ZCIEZs).
- Linking these export processing zones directly to captive green hydrogen/ammonia plants and solar micro-grids guarantees low-carbon product origin certificates, transforming potential tariff penalties into a competitive green premium for Indian heavy industry.
- Currency-Invoicing Hubs and Local Currency Trade Settlement (LCTS):
- Accelerating bilateral Local Currency Settlement Frameworks (LCSF) shields Indian exporters from Western clearinghouse sanctions and USD exchange-rate volatility.
- Establishing specialized Vostro account clearing hubs paired with real-time cross-border payment linkings (such as UPI-PayNow integration) cuts transaction friction and currency conversion across major regional trade hubs.
- Operationalizing Export Factoring and Shared-Risk Insurance Subvention:
- Building on the newly established Export Promotion Mission (EPM) framework, scaling digital export factoring mechanisms with targeted interest subvention unlocks immediate working capital for MSME exporters without collateral constraints.
- Coupling this with non-recourse export credit insurance guarantees for emerging high-risk destinations in Latin America, Central Asia, and Africa de-risks non-payment hazards, enabling small-scale manufacturers to capture non-traditional markets confidently.
- Predictable Trade Policy and Competitive Access to Inputs:
- India should adopt a rolling five-year tariff roadmap, reduce inverted duty structures and provide adequate transition periods before changing export rules or introducing Quality Control Orders.
- Every major input restriction should undergo an export-competitiveness assessment, examining its effect on downstream manufacturers, delivery schedules and production costs.
- Emergency restrictions on agricultural exports should follow published triggers and review dates wherever feasible.
- Deeper Supplier Networks and Greater Domestic Value Creation:
- India should complement final-product manufacturing with supplier-development programmes covering components, industrial machinery, materials and product design.
- Anchor manufacturers could offer qualified MSMEs multi-year purchase commitments, technical mentoring and access to testing facilities, helping them meet international specifications.
- Public support should prioritise R&D, workforce training and shared infrastructure, with results assessed through productivity, domestic value creation and supplier upgrading.
- Innovation-Led Services Exports and Industry-Linked Skills Development:
- India should expand capabilities in AI implementation, cybersecurity, engineering design, digital healthcare and specialised professional services.
- Universities, Global Capability Centres and domestic firms could jointly offer paid apprenticeships, industry-designed courses and applied research projects, with training evaluated through demonstrated skills and employment outcomes.
- Commercialisation support should help firms develop intellectual property and reusable products, strengthening earnings beyond manpower-based contracts.
- India’s impressive export trajectory underscores its growing integration into global value chains, particularly across electronics, defense, and business services. Aligning with the Prime Minister’s economic vision to “build more, produce more, connect more, and export more,” India must move from resilience to “strategic indispensability” in global value chains to reduce vulnerability to coercive measures. By establishing Zero-Carbon Industrial Export Zones, expanding Local Currency Settlement Frameworks, and de-risking MSME trade finance, India can insulate its trade sector from global volatility and secure its position as a high-value, resilient global manufacturing hub.