Understanding the global economic landscape is a strategic imperative for any trading nation. International trends in growth, inflation, and geopolitical events create a dynamic environment of challenges and opportunities that directly influence a country's foreign trade ambitions. Against a backdrop of pandemic-induced supply disruptions, geopolitical conflicts, and tightening monetary policies, the world economy has demonstrated resilience, but its growth trajectory remains below historical norms. This complex global context provides the essential framework for evaluating India's recent trade performance and strategic direction.
According to the International Monetary Fund (IMF), global growth was estimated at 3.3% in 2023 and is projected to moderate slightly to 3.2% in both 2024 and 2025. A clear divergence in economic momentum is evident between developed and developing nations. The aggregate output for Advanced Economies (AEs) is expected to grow from 1.7% in 2023 to 1.8% in both 2024 and 2025. In contrast, Emerging Market and Developing Economies (EMDEs) are projected to expand at a more robust rate of 4.2% in 2024 and 2025, a slight deceleration from the 4.4% growth recorded in 2023.
The World Trade Organization (WTO) reports that global merchandise trade, after contracting by 1.1% in 2023, is poised for a rebound. Projected growth of 2.7% in 2024 represents a significant upgrade from the WTO's previous forecast of 2.6%, signaling a more positive-than-expected outlook for recovery, which is expected to continue with 3.0% growth in 2025. This recovery is not uniform; in 2024, Asia is forecast to be a primary engine of this revival with exports growing by a strong 7.4%. Meanwhile, other regions like the Middle East (9.0%) and South America (5.6%) are expected to lead in import growth, indicating varied patterns of demand recovery worldwide.
This section evaluates India's aggregate trade performance over the past decade, highlighting a consistent growth trajectory and a notable resilience in the face of the global economic and geopolitical headwinds previously discussed. Despite a challenging international environment, India's overall trade has not only sustained its momentum but has also shown significant improvements in its trade balance and global standing.
India's total trade, combining both merchandise and services, reached US 778.13 billion in the 2023-24 fiscal year. This represents a marginal but positive growth of 0.22% over the previous year's record high of US 776.40 billion, underscoring the stability of India's export engine even during a period of global slowdown.
The 35.54% contraction in the trade deficit from US 121.62 billion in 2022-23 to US 78.39 billion in 2023-24 is a key strategic gain. This substantial reduction enhances India's macroeconomic stability by reducing its reliance on external financing and strengthening the rupee, providing a more resilient foundation for future growth.
Over the last decade, India has steadily enhanced its position in the global trade landscape:
Having established this high-level performance, the following sections will deconstruct these aggregate figures into their core merchandise and service components to provide a more granular analysis of India's trade dynamics.
Analyzing the composition of merchandise trade is strategically vital, as it reveals underlying structural shifts in a nation's export capabilities and evolving market focus. This section dissects India's goods trade, moving beyond headline numbers to identify areas of strength, key trading partners, and the transformation of its export basket.
In 2023-24, India's merchandise exports were valued at US 437.07 billion, while imports stood at US 678.21 billion. The 1.45% growth in non-petroleum and non-gems & jewellery exports to US$ 320.21 billion is a critical indicator of the de-risking and diversification of India's export basket. This resilience in core manufacturing sectors, even as commodity-driven exports faced headwinds, underscores the success of policies aimed at building a more robust and less volatile export engine.
The composition of India's principal traded goods provides insight into its industrial strengths and domestic demands.
India's engagement with its major trading partners is evolving, reflecting both geopolitical realignments and strategic market diversification efforts.
A critical strategic imbalance is evident: while China is India's largest source of imports at US 101.74 billion, it ranks only fourth as an export destination at US 16.67 billion. This highlights a significant trade deficit and a core challenge for India's trade policy, which aims to reduce dependency and enhance market access.
A decade-long analysis from FY 2015 to FY 2024 shows India has executed a strategic pivot towards developed markets, evidenced by the significant increase in export shares to NAFTA (from 15.31% to 19.83%) and to the European Union (from 12.95% to 17.37%). This deepening engagement with North American and European markets underscores a successful push to diversify beyond traditional export destinations.
The surge in Electronic Goods' export share from 2.02% in 2014-15 to 6.66% in 2023-24 is not an isolated trend but a direct outcome of strategic policy interventions like the Production-Linked Incentive (PLI) schemes. This structural transformation signals a successful pivot from traditional, labor-intensive sectors like Gems & Jewellery and Textiles towards high-value, technology-driven manufacturing, positioning India as a credible player in global electronics value chains.
This detailed look at merchandise trade sets the stage for an analysis of India's other economic powerhouse: the services sector.
The services sector is a critical pillar of the Indian economy and a cornerstone of its foreign trade strategy. Its significance lies in its consistent ability to generate a substantial trade surplus, which plays a crucial role in offsetting the merchandise trade deficit and contributing to overall economic stability and foreign exchange reserves.
In 2023-24, India's services exports continued their impressive growth trajectory, reaching a value of US$ 341.06 billion. This represents a robust 4.84% growth over the previous fiscal year. This performance is part of a longer-term trend of exceptional expansion, evidenced by an impressive Compound Annual Growth Rate (CAGR) of 8.88% between 2014 and 2023.
The sector's contribution to the overall trade balance is profound. In 2023-24, the services sector generated a trade surplus of **US 162.75 billion**, a significant increase from the US 143.28 billion surplus recorded in 2022-23. This growing surplus highlights the sector's increasing importance as a net earner of foreign exchange for the country.
This consistently strong performance is supported and guided by a robust policy framework designed to foster growth and competitiveness.
A nation's trade performance is fundamentally underpinned by its national policy framework. For India, the Foreign Trade Policy (FTP) 2023 provides the overarching strategic direction, creating an enabling ecosystem for exporters and aligning trade objectives with broader economic goals. This section analyzes the core objectives and key schemes of FTP 2023.
The policy aims to establish a predictable and equitable environment for trade, promote sustainable practices, and reduce transaction costs to enhance the ease of doing business. Rooted in the principle of "Atmanirbhar Bharat" (self-reliant India), its key objectives include achieving deeper penetration into global markets and integrating Indian enterprise into global value chains.
Several major export promotion and duty remission schemes form the operational core of the FTP:
While this high-level policy framework sets the domestic stage, its success is complemented by specific, ongoing diplomatic efforts to secure and expand market access abroad.
Securing favorable trade terms and expanding market access through international negotiations is a strategic imperative for achieving national export ambitions. This section evaluates India's proactive engagement in bilateral, regional, and multilateral forums, highlighting key agreements and ongoing discussions aimed at deepening its global economic integration.
India is actively pursuing trade agreements with several key partners to create new opportunities for its exporters. The current status of major negotiations includes:
The India-EU Free Trade Agreement (FTA) negotiations, formally re-launched in June 2022, represent a cornerstone of India's trade diplomacy. Nine rounds of negotiations have been held, covering 23 distinct policy areas. Successfully concluding the EU FTA is a cornerstone of achieving the US$ 2 trillion export target, as it would unlock preferential access to a major developed market, particularly for high-potential sectors like textiles, pharmaceuticals, and automotive components.
Based on an EU summary, the key potential outcomes of the FTA include:
The scope of the agreement extends far beyond goods, incorporating modern chapters on critical areas such as Services, Digital Trade, Intellectual Property, and Trade and Sustainable Development, reflecting the comprehensive nature of 21st-century trade deals.
At the multilateral level, India remains an active and influential voice at the World Trade Organization. During the 13th Ministerial Conference (MC-13), India articulated its positions on several critical issues:
In conclusion, India is navigating a complex global trade environment with a clear strategic vision aimed at achieving US$ 2 trillion in exports by 2030. This ambitious goal is supported by a multi-pronged approach that combines robust domestic policy reforms under the Foreign Trade Policy 2023 with proactive and strategic international engagement. The resilience shown in its recent performance, the structural shift towards higher-value exports, and the continued strength of its services sector, all backed by a dynamic diplomatic agenda, position India to play an increasingly pivotal role in global trade.
