Changing Trade Landscape Shifts India’s Export Basket

Export diversification has been key to India’s remarkable performance post-1991 economic reforms, having grown faster than the rate of growth of world exports despite strong headwinds. Electronic goods, drugs and pharmaceuticals, and iron ore have emerged as standout sectors with the country’s export basket witnessing a shift from labour intensive to such capital-and skill-intensive products, albeit gradually.

India turned its story around in one decade, diversifying its export basket and moving toward higher value-added products as policymakers realised the need to produce high-quality, cost-competitive goods to be able to compete with the rest of the world. As a result, India’s merchandise exports have shifted away from traditional commodity baskets, such as textiles and gems and jewellery, and are more focused on engineering goods, organic and inorganic chemicals, and electronic goods.


A comparison of the current trade basket to the early 1990s reveals that India added 628 new products by 2022, in addition to the 3,800 products since 1994. The new products are highly concentrated in high-tech manufactured goods, chemicals, and electronics and have shown steady growth over the years. Besides carving out new markets between 1994 and 2022, India has also become the leader in some of the new product categories like shipping vessels and iron and steel alloys.

As a result, the proportion of engineering goods, pharmaceuticals, and electronics goods in total exports increased, while traditional baskets’ share fell. Between April and November 2023, exports of electronic goods jumped 23.38 per cent annually to USD 17.73 billion. Exports of drugs and pharmaceuticals during the period rose by 8.09 per cent to USD 16.56 billion, while exports of iron-ore surged 204.4 per cent to USD 2.07 billion, according to data from the government’s Niryat website (National Import-Export Record for Yearly Analysis of Trade).

India’s exports in December 2023 stood at USD 38.45 billion, up from USD 38.08 billion seen in the same month last year. Exports of engineering goods totalled USD 10.04 billion in December 2023, up 10.19 per cent from USD 9.11 billion in the same month the previous year. The last month of 2023 also set a new monthly high for electronics exports for the current fiscal year as the exports increased 14.41 per cent to USD 2.62 billion from USD 2.29 billion in December 2022. So was the case with drugs and pharmaceutical products valued at USD 2.47 billion, a 9.30 per cent increase from USD 2.27 billion in the same month the previous year.

The country’s merchandise trade deficit, on the other hand, decreased to USD 19.8 billion in December 2023 from USD 23.14 billion in the same month the previous year.

In 2023, India’s trade scenario mirrored the global trend, experiencing a 5.3 per cent fall in merchandise exports, aligned with a global 5 per cent decline amid geopolitical strains and shifting trade patterns, according to UNCTAD (United Nations Conference on Trade and Development). The decline was particularly evident in labour-intensive sectors like textiles and leather. However, the country’s overall trade in 2023 remained at the same level as the previous year, courtesy diversion of trade from other countries in favour of Indian products, a continued increase in global commodity prices and a strong rebound in global trade.

The 2023 edition of the World Trade Statistical Review (WTSR) of World Trade Organization (WTO) reveals that India has retained its 18th position among world’s leading exporters in merchandise trade since 2021.


The top 10 highly growing export commodities, which have shown a consistent high growth during the last five years (FY 2019 to FY 2023 average), include sugar and confectionary (43%), mineral fuel and oils (36%), electrical machinery and parts (27%), aluminum and articles (18%), inorganic chemicals, precious and rare- earth metals (16%) miscellaneous chemical products (16%), cereals (14%), iron and steel (12%), ships, boats and floating structures (11%), rubber and articles (11%) and optical, photographic, and medical apparatus (10%), according to an analysis on the Growth Dynamics of India’s Exports by PHD Research Bureau.

The high growth-high volume export commodities have significant potential to take India’s exports to new heights. Exports from India are also branching out into newer areas of trade such as Latin America, namely Brazil and parts of Africa.


According to the commerce ministry data, India’s exports of goods and services rose marginally by 0.4% to USD 765.6 billion in 2023. The country’s overall outbound shipments are expected to scale new heights, touching USD 900 billion in 2024 amid easing inflation in developed countries, softening interest rates, and a gradual pick up in global demand. Electrical and electronics, machinery, automobile and auto components, high tech products, pharmaceuticals, medical and diagnostic equipment are likely to witness an upswing with exporters having managed to tap opportunities in developed as well developing economies despite geopolitical tensions and China’s subdued post-pandemic recovery.

However, reports suggest that recent tensions in the Red Sea could shave USD 30 billion off that figure.

In its quarterly study on the overall exports, Exim Bank said the non-oil exports will grow 4.55% to USD 95 billion in the January-March 2024 quarter. The merchandise exports are set to grow by nearly 3% to USD 118.2 billion in the March quarter compared to the same period a year ago. “Positive growth in India’s exports could be as a result of India’s strong GDP growth fundamentals and outlook and expected global easing of monetary tightening spurring global demand,” the policy bank said in its report.


As per the first advance estimates of national income released by the National Statistical Office (NSO), the Indian economy is estimated to grow by 7.3% in the 2023-24 fiscal, against 7.2% a year ago, mainly due to a good show by mining and quarrying, manufacturing and certain segments of services sectors.

The dynamic policy environment provided by the government, double digit growth in services exports along with the efforts to connect with global value chains will help India to reach USD 1 trillion by 2024-25 and USD 2 trillion by 2029-30, the analysis by PHB Research Bureau revealed.


The PHD Chamber of Commerce and Industry’s research report has also positioned India’s exports as the most resilient among the top 20 global exporters. The export targets have become achievable due to government-run schemes such as the production-linked incentive scheme, the new-age free trade agreements, along with fundamental drivers of exports like price competitiveness, access to markets, and the development of markets for niche products.

The Foreign Trade Policy 2023 has created an enabling ecosystem for exporters, promoting and developing each state to integrate with the global value chains. While the manufacturing sector has witnessed growth since the launch of the ‘Make in India’ movement in 2014, production-linked incentives for 14 key sectors further enhanced manufacturing capabilities and exports in 2023. The numerous PLI schemes across sectors—such as automobile, textile, electronics, pharmaceuticals, and food products—have been empowering domestic manufacturers to become globally competitive.

The focus is now on 27 sectors as part of ‘Make in India 2.0. The department for promotion of industry and internal trade (DPIIT) is working with 24 sub-sectors, including electronics, agrochemicals, steel, EV components and integrated circuits, to promote domestic manufacturing, boost exports and reduce imports.

India has also been focusing on improving logistics with PM Gati Shakti and the National Logistics Policy, which have reduced cost and increased the competitiveness of our products. Its rankings in the World Bank’s Logistics Performance Index has improved significantly over the years, rising from 54 in 2014 to 44 in 2018 and moving up six places to 38th out of 139 countries in 2023.


Widespread economic fragility, geopolitical shocks, and the Middle East crisis, leading to the intensification of the Red Sea impasse, escalating debt, and deepening geo-economic fragmentation, among other factors, can impact India’s trade performance in 2024.

Since the outbreak of the Israel-Hamas war in October, Houthi rebels from Yemen have stepped up their attacks on vessels in the vital shipping lane as a protest against Israel’s actions in Gaza. This has led freight companies to choose the longer route around Africa to reach the west or wait at nearby ports to ensure safe passage through the Suez Canal. The Red Sea problem might affect exports in the short run amid lack of container and rising freight cost but a better trend may emerge by mid-March.

With WTO estimating global trade growth to pick up to 3.3%  the “highly uncertain and generally pessimistic” 2024 will be the time to test the effectiveness of India’s new foreign trade policy (FTP) which talks of export promotion through collaboration between exporters, state governments, districts, and Indian Missions. The need for strategic efforts may also lead the government to relook at some of the current export restrictions it has put on certain commodities like sugar, wheat and rice.

The upcoming year is set to test the resilience of India’s trade ecosystem with growth projected to remain strong at 6.5% in both 2024 and 2025, which is an upgrade from October of 0.2 percentage point for both years.

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