Economic Survey 2026 Unveils India's Strategic Export Diversification
On Thursday, January 29, Finance Minister Nirmala Sitharaman presented the Economic Survey of India for the financial year 2025–26 in Parliament, officially initiating the lead-up to the Union Budget, which is set to be released on Sunday, February 1. This year's Budget unveiling falls on a weekend, marking a significant moment in India's economic calendar.
India-US Trade Agreement and Export Shifts
The much-discussed India-US trade agreement was highlighted in the Economic Survey 2026, which pointed out that while progress has been made in negotiations, some tariff effects have been noted. However, the document revealed a strategic pivot in India's export strategy.
India's exporters are progressively shifting their focus away from the US market, as recent figures for April–November FY26 indicate a notable move towards the Middle East, Europe, Africa, and certain regions in Asia. This transition is driven by a decline in demand from the US in various key sectors, prompting exporters to explore alternative markets to maintain overall growth.
Sector-Wise Export Performance and Diversification
Gems and Jewellery Sector: This sector experienced the most significant decline in US exports, dropping by 44.3% compared to the previous year, even as global exports saw a slight increase of 0.6%. The proportion of US imports in India's gems and jewellery exports plummeted to 18.7% from 33.7%, while shipments to the UAE and Hong Kong rose significantly, now accounting for 53.6% of exports.
Exports of gold jewellery to Bahrain and Saudi Arabia have risen sharply, while pearls and precious stones have seen notable increases in exports to Canada, Mexico, and China. This shift is buoyed by the India-UAE Comprehensive Economic Partnership Agreement (CEPA) and expectations surrounding the India-UK Free Trade Agreement (FTA).
Marine Products Sector: Exports to the US fell by 5.7%, but overall exports grew by 16.1%, fueled by high demand from Vietnam, Malaysia, China, and various European nations, including Belgium, Germany, and Poland.
Auto Components Industry: This sector experienced a 6.8% decline in exports to the US, while global shipments saw a 6% increase, driven by a rise in exports to the UAE, Germany, Belgium, Slovenia, Myanmar, and Brazil. The UAE’s share of auto component exports increased from 3% to 5.3%, indicating its expanding significance.
Textiles and Related Products Sector: This sector encountered a 6.1% decrease in exports to the US, but efforts to diversify into Africa, Europe, and West Asia helped maintain stability in global shipments.
Pharmaceuticals Industry: Showing notable resilience, international exports increased by 6.5% despite uncertainties related to tariffs in the US. Gains in Africa, Latin America, and Europe contributed to offsetting fluctuations.
Strategic Implications and Global Presence
Overall, the information highlights a strategic shift in exports, as Indian exporters lessen their reliance on the US and work towards establishing a more varied global presence. This diversification is crucial for long-term economic stability and growth.
Importance of India-US Trade Deal
According to experts, the United States stands as India’s most essential strategic and economic ally, impacting export expansion, technology exchanges, financial inflows, and positioning within global supply chains. A significant agreement with this global leader, due to its economic size, is often referred to as the “Father of all deals.”
A deal with the US would indicate enhanced trade integration, diversification of supply chains, and long-term export predictability—key factors that Foreign Institutional Investors monitor when directing capital towards emerging markets. This underscores the ongoing importance of negotiations despite the current export shifts.
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