A leading economic think tank has delivered a sobering assessment of India's ambitious export targets, predicting that the goal of shipping goods and services worth $1 trillion by the end of the financial year 2025-26 is likely to remain out of reach. The Global Trade Research Initiative (GTRI), in its latest report released on Thursday, cited weak global demand and rising protectionist trends as major headwinds for merchandise shipments.
Flat Growth and a Revised Forecast
Ajay Shrivastava, founder of GTRI, stated that India is expected to record a flat increase in exports this year, with goods outflows showing almost no growth. The think tank forecasts that total exports in FY26 will rise only to approximately $850 billion, falling short of the $1 trillion mark by a significant $150 billion. This projection is based on current trends and does not account for potential major trade deals.
In the previous financial year (FY25), India's overall exports stood at $825 billion, comprising $438 billion in merchandise and $387 billion in services. The GTRI report indicates that services exports might be able to cross the $400 billion threshold, providing what it calls "the only meaningful growth cushion for India's trade" amidst the struggle with weak worldwide demand.
The Crucial Role of Pending Trade Deals
Shrivastava offered a glimmer of hope, suggesting the target could still be achieved if India succeeds in sealing significant trade agreements. “That I think we may achieve once our trade deal with the US and EU comes. That is maybe next year, not this year,” he remarked. He emphasized that while exports face sustained external pressure, domestic economic conditions remain stable, with robust GDP and low inflation numbers cushioning the overall impact.
US and EU Trade: A Challenging Landscape
Despite an overall slowdown, India has begun diversifying its export destinations. However, trade with two of its largest partners presents a concerning picture. Exports to the United States declined sharply by almost 21% between May and November, a drop directly linked to former President Donald Trump's imposition of 50% tariffs on certain Indian shipments.
The report warned that unless Washington rolls back the extra duties or finalizes a trade deal, "exports to India's largest market risk further erosion." The situation with the European Union is also complex. Exports to the EU dropped by nearly 24% even before new duties, hampered by the bloc's stringent compliance and reporting requirements.
A major future challenge is the EU's Carbon Border Adjustment Mechanism (CBAM), set to activate on January 1, 2026. This will effectively impose a carbon tax on imports. From 2026, EU importers will label Indian goods inclusive of CBAM costs, with payments settled through certificate surrender in 2027.
Diversification and Strategic Shifts for 2026
Shrivastava noted a silver lining: “During this time, our exports to the rest of the world increased by 5.5%. That means diversification already started happening in a small way.” However, he cautioned that geographical diversification must be paired with a change in the composition of India’s export basket, which currently needs more medium to high-tech products.
For 2026, GTRI recommends an inward-focused strategy, as India has limited influence over global geopolitics. Key pillars include:
- Improving product quality, value chains, and reducing production costs to boost competitiveness.
- Focusing on high-opportunity sectors like electronics, engineering, and textiles, where higher value addition can sustain exports in a hostile trade environment.
- Moving beyond just signing Free Trade Agreements (FTAs)—India has 18—to "making FTAs deliver real export gains."
- Executing policies effectively, operationalizing the Export Promotion Mission, and simplifying regulations.
The think tank concluded that tariffs, climate taxes, and geopolitical uncertainty will continue to weigh on global trade. Therefore, India's export survival and growth will fundamentally depend on enhancing domestic competitiveness through better products, deeper manufacturing capabilities, and lower costs.
