Introduction
India’s foreign trade in 2025 is at a critical juncture. With rising global uncertainties, shifting geopolitical ties, and new trade pacts in sight, the nation’s export-import landscape is evolving fast. In this post, we bring you the latest data on merchandise and services trade, unpack key drivers and headwinds, and analyze how India is strategically steering through it. From soaring U.S. tariffs to a historic UK FTA, here’s your comprehensive, simplified guide to India’s foreign trade in 2025.
1. Current Trade Snapshot
April–June 2025 (Q1 FY26): India’s combined exports (merchandise + services) stood at US $210.31 billion, up 5.94% YoY, while imports reached US $230.62 billion, growing 4.38% YoY. The trade deficit narrowed to US $20.31 billion from US $22.42 billion a year ago. Press Information Bureau
- June 2025 (Monthly Snapshot): Merchandise exports were US $35.14 billion (flat), while imports eased to US $53.92 billion, down from US $56 billion—resulting in a monthly deficit of US $18.78 billion. The Economic Times
- April–July 2025–26 (4-month period): Exports totaled US $149.2 billion (up 3.07%), while imports surged to US $244.01 billion (up 5.36%), widening the trade shortfall to US $94.81 billion. The Times of India
- Ambitious Target: India is aiming for US $1 trillion in exports for FY 2025–26—supported by ongoing FTAs and export-promotion strategies. DD News
2. Trade Drivers & Headwinds
Drivers:
- Surge in Services Exports: Robust IT and business services boosted services receipts (Q1 services exports: US $98.13 billion) driving overall trade growth. Press Information BureauReuters
- Strengthening with Strategic Partners: Exports to the U.S. increased by ~23.5% to US $8.3 billion in June 2025, retaining the U.S. as India’s top trading partner for the quarter. IBEF
- Resilience Amid Unrest: Commerce Minister Piyush Goyal projected India may surpass US $900 billion in combined exports for FY 2025–26 despite global headwinds. The Times of India
Headwinds:
- Steep U.S. Tariffs: The U.S. imposed a 50% tariff on key Indian exports, jeopardizing apparel, gems, seafood, and furniture sectors. Exports to the U.S. may shrink by up to US $40 billion, potentially dragging GDP by 1%. The Washington PostIndiatimesWall Street Journal
- Current Account Deficit Rising: Q1 FY26 saw a current account deficit of US $2.4 billion—reversing the previous quarter’s surplus. The merchandise trade shortfall widened to US $68.5 billion, despite strong services and remittances. Reuters
- Growth Imbalance Looms: RBI forecasts imports (2.5% growth) to outpace exports (1.2%), pushing the current account deficit to 0.8–0.9% of GDP. The Economic Times
3. Strategic Responses & Forward Moves
- Diversifying Markets: India is pivoting to markets beyond the U.S., including the EU, Middle East, Africa, and Latin America—lessening exposure to U.S. trade volatility. IndiatimesReuters
- Trade Agreements in Focus:
- India–UK FTA: Signed in July 2025, it sets the stage for enhanced trade access and market diversification in Europe. Wikipedia
- Policy Support: India plans to cushion exporters through incentives, PLI schemes, and trade agreements (UK, UAE), while nudging for better GST and trade reforms. ReutersThe Economic Times
- Optimistic Outlook: Despite immediate barriers, analysts remain hopeful—strong services exports, export promotion missions, and resilience in manufacturing may help India weather the storm. The Times of India+1
4. Implications for Stakeholders
- Exporters & MSMEs: Labor-intensive sectors face immediate pressure due to U.S. tariffs—requiring urgent diversification and cost realignment.
- Policymakers: Need to fast-track FTA implementation, fiscal support, and domestic reforms (e.g., GST, infrastructure) to sustain trade momentum.
- Consumers & Industries: A weak rupee, if sustained, could raise import costs. Strategic sourcing and local value-addition may become essential.
- Economy at Large: While global tensions pose risks, a resilient services sector and progressive trade strategies could help India navigate toward its US $1 trillion export goal.
5. Conclusion
India’s 2025 trade scenario is a mix of growth, challenge, and opportunity. Exports and services continue to show strength, but steep U.S. tariffs and widening deficits pose real dangers. The government’s strategic responses—like trade agreements, diversification, and export support—are critical levers. If India can pivot skillfully, it still has a shot at crossing the US $900 billion-to-trillion export mark, reinforcing its place as a global trade heavyweight.
READ LATEST FTA BETWEEN INDIA AND UK DETAILS FROM OFFICIAL SOURCE
READ SYNOPSIS OF UK INDIA COMPREHENSIVE ECONOMIC AND TRADE AGREEMENT OFFICIAL SOURCE
