Export Diversification: India’s strategy for a resilient global trade

India’s Export Diversification strategy aims at building a resilient global trade footprint. Read here to learn more about it.

India’s export trajectory is undergoing a structural shift, reflecting a deliberate policy emphasis on diversification beyond traditional markets like the United States.

Despite global headwinds, merchandise exports recorded a 6.7% growth to USD 36.38 billion in 2025, showcasing India’s ability to navigate trade uncertainties through strategic outreach to Africa, the Middle East, and Southeast Asia.

Export diversification

Export diversification- both in terms of products and markets– is essential for economic stability.

It cushions an economy from global shocks, reduces dependence on a few trade partners, and enhances innovation and competitiveness.

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For India, this strategy aligns with the broader goals of Viksit Bharat 2047 and the ambition of becoming one of the top three global exporters.

Key Trends in India’s Export Diversification

1. Decline in US Exports

• India’s exports to the United States declined by 12%, mainly due to reduced demand and escalating trade tensions.
• Tariffs between April-August 2025 rose from 10% to 50%, leading to a fall in exports from USD 8.8 billion to USD 5.5 billion.
• Even tariff-free exports saw a 47% decline, indicating structural dependence on the US market.
• However, this contraction has been partly offset by India’s growing trade with other regions.

2. Rise of Non-US Markets

India’s engagement with Africa, the Middle East, and Southeast Asia has intensified:

• Marine exports rose by 60% to China, Vietnam, and Thailand.
• Basmati rice exports to Iran increased sixfold.
• Tea exports expanded to the UAE, Iraq, and Germany.
  These reflect India’s success in creating alternative demand clusters for traditional and high-value products.

3. Government and Policy Interventions

The Foreign Trade Policy (FTP) 2023 and the Market Access Initiative (MAI) have been pivotal in promoting market diversification.

• These programs incentivize exporters to explore new geographies.
• Logistics and procedural reforms have improved trade efficiency.
• Active participation in global trade fairs and sector-specific outreach has enhanced visibility.

Factors Driving Export Diversification

1. Regional Free Trade Agreements (FTAs)

• India’s FTAs with the UAE, Japan, and South Korea have expanded access to non-Western markets.
• The Comprehensive Economic Partnership Agreement (CEPA) with the UAE, for instance, has significantly boosted engineering and gems & jewellery exports.

2. Supply Chain Reorientation

• The global shift towards “China-plus-one” strategies has positioned India as a reliable manufacturing and sourcing hub.
• This transition supports value addition, particularly in electronics, machinery, and pharmaceuticals.

3. Government Outreach and PLI Schemes

• Identification of 40 key importing nations across Europe, Asia, Africa, and Latin America has been central to India’s export push.
• Production-Linked Incentive (PLI) schemes in sectors like electronics, textiles, and pharmaceuticals have enhanced competitiveness and integration with global supply chains.

India’s Export Basket (FY 2024–25)

Challenges

• US Dependence: The high-value nature of US exports, especially in IT, engineering, and pharmaceuticals, remains hard to replace.
• Competition from China and ASEAN: Indian exporters face cost and efficiency challenges in penetrating global value chains.
• Logistical and compliance barriers: Despite reforms, port infrastructure and certification delays continue to affect competitiveness.

Way forward

India’s export diversification strategy must continue focusing on regional integration, technology-driven exports, and sustainable trade practices.

• Strengthening ties through Bilateral Trade Agreements (BTAs), including the proposed US-India BTA, could boost bilateral trade to USD 500 billion by 2030.
• Continued investment in innovation, digital trade platforms, and green exports will be key to long-term resilience.

Conclusion

India’s export diversification marks a strategic shift from dependency to resilience and adaptability.

By opening new markets, upgrading manufacturing, and aligning policies with global trends, India is not merely expanding trade volumes but redefining its place in the global economic order.

The journey toward Viksit Bharat 2047 will depend on sustaining this momentum through inclusive, innovation-led, and sustainable trade growth.

Previous years questions

1. India’s foreign trade policy aims at integrating the Indian economy with the global economy. Discuss the key features and challenges of the Foreign Trade Policy 2023.” (Mains 2023)
2. Examine the role of Free Trade Agreements (FTAs) in promoting India’s exports. Why have some FTAs failed to deliver expected results? (Mains 2022)
3. (2021) – What are the main objectives of India’s trade policy? How has the policy evolved to meet changing global trade dynamics? (Mains 2021)
4. Discuss the significance of logistics and infrastructure development in India’s trade competitiveness.” (Mains 2020)
5. How has India benefited from its trade agreements with other countries and regional groupings? (Mains 2019)
6. Examine the challenges in India’s merchandise export sector and suggest policy measures for improving competitiveness. (Mains 2018)
7. What are the reasons for India’s poor share in global trade? Suggest measures to improve India’s export performance. (Mains 2016)
8. India’s trade policy is shifting from protectionism to integration. Discuss the implications for domestic industries. (Mains 2015)

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• Foreign trade of India
• Export Preparedness Index
• Indian Defence Exports
• Agricultural Export Policy