India Merchandise Exports vs Services

India's merchandise exports have undergone a significant transformation in recent years. Traditionally known for shipping physical goods like textiles and minerals, India's merchandise exports now reflect a more diversified and competitive global presence.

In 2025, merchandise exports remain a crucial component of India’s foreign trade, shaped by global demand shifts, evolving supply chains, and developments in international trade law.

Growth of India's Merchandise Exports Over the Years

From $66.3 billion in 2003–04 to a peak of $456.1 billion in 2022–23, India's merchandise exports have seen consistent long-term growth. Although there was a slight decline to $441.8 billion in 2024–25 due to global headwinds, the export sector remains robust.

Key drivers of this growth include:

• Engineering goods

• Pharmaceutical products

• Petroleum derivatives

• Electronics and machinery

• Textiles and garments

These sectors represent the core of India’s export economy, making India's merchandise exports a critical engine for GDP and employment.

What Are India’s Top Merchandise Exports in 2025?

India's merchandise exports in 2025 are dominated by:

• Engineering goods (auto components, industrial machinery)

• Refined petroleum products

• Pharmaceuticals and medical equipment

• Textiles, garments, and raw cotton

• Precious stones and jewelry

These products are in high demand globally and account for a large portion of India's export figures for 2025.

Trade Deficit and Challenges

Despite strong exports, India's merchandise trade continues to run a large trade deficit, reaching $287.2 billion in 2024–25, driven by imports of crude oil, gold, electronics, and machinery.

Major challenges in India’s merchandise export sector:

• High logistics costs

• Volatile global commodity prices

• Tariff and non-tariff barriers

• Limited free trade agreements

• Slow infrastructure improvements

These factors limit the full potential of India's merchandise exports, especially in a globally competitive environment.

India Merchandise Exports vs Services Exports

While India's merchandise exports remain a central part of foreign trade, services exports have overtaken them in foreign exchange earnings. In 2024–25, services exports reached $387.5 billion, supported by IT, finance, and professional services.

Key differences:

• Merchandise exports are more exposed to physical bottlenecks, shipping delays, and customs duties.

• Services exports are agile, digital, and less impacted by border regulations.

Understanding this shift helps assess India’s export economy holistically.

Policy and International Trade Law

India’s trade policies are influenced by global agreements under international trade law, WTO obligations, and national incentives like:

• RoDTEP Scheme

• EPCG Scheme

• PLI (Production Linked Incentives)

• Sector-specific export schemes

These policies aim to support India's merchandise exports and promote long-term competitiveness in key sectors.

Role of Global Demand and Economic Trends

• The role of global demand in India’s merchandise exports is vital. Any dip in the U.S. or EU economies immediately affects key export items like textiles, leather, and auto parts.

• Trends in India’s merchandise trade performance also show signs of shifting post-COVID, with increased diversification into new markets like Africa, Southeast Asia, and Latin America.

• The impact of the global slowdown on India’s merchandise trade in 2024–25 was evident in a slight decline in total exports. Still, India’s export policy for physical goods remains proactive in signing FTAs and improving competitiveness.

Contribution to GDP and Future Outlook

India's merchandise exports contribute nearly 12% to the national GDP, providing critical support to manufacturing jobs and foreign exchange reserves. Key sectors driving India’s merchandise export growth—such as engineering, pharma, and electronics—are expected to benefit from:

• Improved infrastructure (ports, highways)

• Digitalization and e-commerce exports

• Targeted export promotion schemes

The contribution of merchandise exports to India’s GDP is likely to rise if policy measures continue supporting high-growth industries.

Final Thoughts

India's merchandise exports play a vital role in the country’s economic growth and global trade presence. While services have become the dominant contributor to foreign exchange, physical goods exports continue to shape India’s manufacturing sector and employment generation.

Despite global challenges and a persistent trade deficit, India’s merchandise exports show resilience and adaptability. With the right policy support, infrastructure, and global demand, the sector holds strong potential for future growth.

For SSC aspirants, understanding the trends, challenges, and global comparisons of India's merchandise exports is essential for both current affairs and economic awareness.