- India's export share to the US remains stable at around 20% despite tariffs and political uncertainty
- Efforts to diversify exports are ongoing but expected to show results over the next two to three years
- Free trade agreements are playing a key role in expanding India’s global trade network and reducing reliance on a single market
India’s share of exports to the US remained largely unchanged despite a year of President Donald Trump’s punitive tariffs and New Delhi’s efforts to diversify its trade with a raft of new deals with other countries.
An analysis of trade ministry data for the 12 months through July shows the US continues to account for about 20% of India’s exports. Over that period, Trump slapped tariffs as high as 50% on Indian goods at one point, before dropping it to 18% in February this year. The goods now carry a 10% tariff rate.
The uncertainty in US-India trade relations prompted Prime Minister Narendra Modi’s government to expedite free trade negotiations with other major markets. In the past year, India has inked a trade deal with the UK, which took effect in July, as well as agreements with the European Union, Oman and New Zealand.
While that diversification push has continued, with exporters scouting newer markets to reduce risk, the US share has remained resilient, underscoring the difficulty of replacing the world’s largest economy.
It will take at least two to three years for market diversification to show meaningful results, said Ajay Sahai, director general of the Federation of Indian Export Organizations, adding that the US continues to be the most attractive market. The share of exports to the US has grown to nearly 20% from 17.4% in 2022-23, official data show.
All the same, “the industry has become extremely cautious of the fact that they have to diversify as a strategy to de-risk,” Sahai said. “And from that perspective, I think it’s a very good lesson the US tariff war taught us.”
India has also broadly maintained its share of exports to other major markets, data for the 12 months through July showed.
The sheer scale and appetite of the US for a broad range of Indian goods make it a uniquely important market, particularly for electronics, engineering goods, pharmaceuticals, gems and jewelry and textiles. The two countries have yet to sign a trade deal, despite months of high-level talks.
Indian officials are working to shift the balance by expanding the number of markets where exporters can compete on favorable terms. The government has also sought to broaden the range of goods sold overseas, adding about 500 new product lines, mainly in electronics, engineering and marine products.
“The focus is on engaging with economies that collectively account for over two-thirds of global GDP,” Commerce Secretary Rajesh Agrawal told Bloomberg News last week when asked about the government’s trade diversification strategy.
“In an environment of global uncertainty and shifting trade patterns, FTAs also serve as institutional anchors for trusted economic partnerships,” Agrawal said referring to Free Trade Agreements. He said the deals aim to reduce reliance on any single market and strengthen trade ties.
Earlier this month, India signed terms of reference with the Southern African Customs Union to accelerate trade negotiations. New Delhi is seeking to extend that network across Latin America, the Middle East and Africa.
Trade agreements already in force have meanwhile begun to show evidence of a potential payoff.
India now counts Australia among its faster-growing markets, while the UAE was its second-biggest export destination in the 12 months through July. Both countries signed trade agreements with India in 2022.
Several smaller destinations are growing rapidly, though from bases that remain a fraction of the US market. In the 12 months through July, nations including Tanzania, Vietnam, South Korea, Sri Lanka, and Kenya were among the markets showing solid growth.
Exports to China have also accelerated, surging 42% in the 12 months through July, according to Bloomberg calculations based on the official figures. India shipped goods worth $21.5 billion to the Asian giant in the period, compared with $88.5 billion to the US.
Pritam Banerjee, a trade analyst and former head of think tank Centre for WTO Studies, said free trade pacts can become a catalyst for shifting manufacturing away from China but warned that India’s window of opportunity is narrow.
Deeper integration with Group of 20 nations, which represent 85% of global GDP, along with countries in Latin America, the Middle East and Africa, would help India immensely in that shift, he said.
Takeaways
- - The US remains India’s most important export destination despite tariff pressure and political uncertainty.
- - India’s diversification strategy is real, but it is a medium-term play rather than an immediate replacement for US demand.
- - Free trade agreements are increasingly central to India’s export sourcing strategy, especially for electronics, engineering goods, and other high-growth sectors.
- - Exporters are likely to keep balancing logistics, pricing, and market access as they look for alternatives across Europe, the Middle East, Africa, and Asia.
- - The broader lesson is that reducing dependency on one market takes time, scale, and sustained policy coordination.
Frequently Asked Questions
Why did India’s export share to the US stay stable despite tariffs? Because the US is still the largest and most attractive market for a wide range of Indian goods, especially in electronics, pharmaceuticals, textiles, and engineering.
Is India’s diversification strategy working? It is progressing, but results are likely to be gradual. Officials and trade analysts say meaningful change may take two to three years.
Which sectors are most affected by these trade shifts? Electronics, engineering goods, pharmaceuticals, gems and jewelry, textiles, and marine products are among the key sectors mentioned.
What is India trying to achieve with new trade deals? India wants to reduce reliance on any single market, improve sourcing and market access, and create stronger logistics and trade links with multiple regions.
Disclaimer: This article may have been created with AI assistance and reviewed by our editorial team. It is provided for general informational purposes only. Readers should verify information independently before relying on this content.
