India’s trade flows have demonstrated remarkable resilience in the face of ongoing global economic headwinds and fluctuating currency values, according to a recent report by SBI Research. Despite international uncertainties, India’s export performance between April and September of FY26 shows positive momentum, indicating a strategic shift in trade partnerships and a proactive governmental response to external challenges. This analysis delves into the key findings of the report, examining the growth in exports, the changing dynamics of trade destinations, and the impact of currency volatility on the Indian economy.
India’s Export Performance: A Resilient Start to FY26
Total merchandise exports for India witnessed a 2.9 per cent increase, reaching USD 220 billion during the April-September period of FY26, compared to USD 214 billion in the same period last year. This growth is a positive indicator of India’s strengthening position in the global market. However, the report highlights a nuanced picture – while overall exports rose, certain sectors and key trading partners experienced varied fortunes. Notably, exports to the United States saw a substantial 13 per cent jump, totaling USD 45 billion against USD 40 billion previously.
US Trade: Growth with a Shifting Share
Despite this strong performance in exports to the US, the report points towards a gradual decrease in the US’s overall share of India’s export pie. Since July 2025, the US portion has steadily declined, reaching 15 per cent in September. This isn’t necessarily a negative signal, but rather a reflection of India’s conscious effort to diversify its export markets and reduce dependence on a single region. The data reveals changing patterns within specific product categories. For instance, the US share in India’s marine product exports decreased from 20 per cent in FY25 to 15 per cent in September, and for precious stones, the decline was even more pronounced – from 37 per cent to just 6 per cent. While this indicates a shift in destination, both marine products and ready-made cotton garments continued to show positive growth during the period.
Diversification of Export Destinations
A significant takeaway from the SBI Research report is the growing diversification of India’s export destinations. Countries like the UAE, China, Vietnam, Japan, Hong Kong, Bangladesh, Sri Lanka, and Nigeria have all increased their share in India’s overall exports across various product groups.
This move towards diversification presents numerous benefits, including reduced vulnerability to economic fluctuations in any single market and enhanced access to new opportunities. The report suggests this expansion may involve an indirect trade route. Specifically, it notes a rise in Australia’s share of US imports of precious stones (from 2 per cent to 9 per cent) and Hong Kong’s share (from 1 per cent to 2 per cent), potentially indicating re-exporting activity. This developing trend could signify a strategic maneuver to navigate existing trade barriers.
Navigating US Tariff Challenges and Government Support
India’s trade relations with the US, although significant, are not without challenges. The Trump administration previously imposed substantial tariffs on Indian goods – the highest amongst Asian nations – impacting crucial sectors such as textiles, jewellery, and, in particular, seafood like shrimp. The disruption caused by these tariffs necessitates a proactive approach to maintain export competitiveness and explore alternative markets.
In response, the Indian government has announced a substantial support package of Rs 45,060 crore for exporters. This includes Rs 20,000 crore in credit guarantees, aimed at lowering the cost of borrowing and encouraging export growth. These measures demonstrate a commitment to supporting Indian businesses as they adapt to the evolving global trade environment.
Currency Volatility and Economic Stability
Meanwhile, the Indian rupee has faced downward pressure, recently breaching 89.49 against the US dollar after a period of relative stability. Factors contributing to this decline include global market turmoil, triggered by a dip in digital assets and the “Sell Japan” trend. The Reserve Bank of India (RBI) has clearly stated its intention not to defend a particular exchange rate level, signaling a preference for allowing market forces to operate.
Analysts generally view the rupee’s depreciation as a short-term adjustment, not indicative of fundamental economic weakness. The current account deficit, which stood at 0.2 per cent of GDP in the first quarter of FY26 – a marked improvement from 0.9 per cent a year earlier – is being driven by robust services exports and remittances, reflecting the underlying strength of the Indian economy.
Outlook for the Remainder of FY26
SBI Research anticipates a modest widening of the current account deficit in the next two quarters, followed by a return to positive territory by the end of the fiscal year. The full-year deficit is projected to be around 1.0 to 1.3 per cent of GDP, with an overall balance of payments shortfall of up to USD 10 billion – a slight increase from the previous year. These projections suggest a stable, though not dramatically expanding, economic outlook.
In conclusion, the SBI Research report paints a picture of an Indian economy demonstrating significant resilience in the face of global challenges. The continuing growth in trade flows, despite currency volatility and tariff concerns, is a testament to the country’s strategic diversification efforts and supportive government policies. Understanding these dynamics is crucial for investors, policymakers, and businesses alike. To stay informed about the ongoing evolution of India’s economic landscape, continue to follow reports from SBI Research and other leading economic institutions.
