Between FY2004 and FY2024, India’s merchandise exports surged six-fold to $437.1 billion, while imports skyrocketed nearly nine-fold to $678.2 billion. This remarkable growth, however, masks significant sectoral variations driven by global disruptions such as the 2008 financial crisis, the Covid pandemic, the US-China trade tensions; and domestic initiatives like ‘Make in India’.

This analysis explores how India’s trade composition has changed over the years, highlighting the shifting roles of different sectors in shaping the country’s trade ambitions.

Diversifying Exports

India’s merchandise export basket has diversified significantly. The agriculture, meat, and processed food sector maintained a stable share of around 11 per cent but saw absolute volumes jump from $7.6 billion in FY2004 to $48.5 billion in FY2024. This growth reflects the rising global appetite for Indian products led by rice, sugar, groundnuts, meat, marine products, coffee, pepper, oil cake, raw tobacco etc.

Energy-related exports, including iron ore and petroleum products, expanded their dominance, with their share rising from 8.9 per cent in FY2004 to over 21 per cent in FY2024. Volumes in this sector reached a staggering $94 billion. Petroleum product exports reached $89.3 billion in FY2024, underscoring India’s role as a key supplier.

Export volumes in chemicals and pharmaceuticals rose from $6.6 billion to $60.8 billion. Their share increased from 10.4 per cent to 13.9 per cent during the period, supported by India’s pharmaceutical leadership and chemical manufacturing advancements.

Machinery, computers, and electrical and electronic products emerged as strong performers. Their shares increased to 6.9 per cent and 7.9 per cent, respectively, with export volumes reaching $30.1 billion and $34.5 billion. These gains highlight India’s growing industrial and technological capabilities. Smartphones are the best success story, with exports rising from zero to $15.6 billion.

Automobiles and parts exports also gained traction, with their share rising to 4.8 per cent in FY2024, as India cemented its position as a global hub for vehicle and component manufacturing. Volumes in this segment surged from $1.7 billion to $21 billion.

Traditional sectors such as textiles and clothing, however, lost ground. Their share dropped sharply from 21.1 per cent in FY2004 to 8 per cent in FY2024. Volume increased from $13.5 billion in FY2004 to $35.0 billion in FY2024. Still, growth lagged behind other sectors due to competition from countries like Bangladesh and Vietnam.

Similarly, the share of diamonds, gold, and related products fell significantly, though volumes increased modestly, underscoring changing global consumer preferences.

Overall, India’s export basket has diversified significantly. While traditional sectors have faced challenges, the rise of high-value and technology-driven exports signals a shift towards industrial sophistication. This transformation positions India as a competitive global exporter, though lagging sectors like textiles and diamonds highlight the need for innovation, branding, and strategic interventions to sustain growth across the board.

Import surge

India’s import basket reflects the country’s expanding energy needs, industrial growth, and technological ambitions. The share of ores, minerals, coal, and petroleum peaked at 42.3 per cent in FY2014 but came down to 33.8 per cent in FY2024. Import volumes surged from $23.6 billion to $229.2 billion, driven by reliance on crude oil, and coal. Crude petroleum oil was the most significant import, with $139.2 billion in FY2024.

Electrical and electronics imports experienced the most significant growth, with their share rising from 8.4 per cent in FY2004 to 11.7 per cent in FY2024. Import volumes reached $79.4 billion, driven by the need to import components for smartphones, telecom equipment, and other electronics.

Machinery and computer imports accounted for 8.5 per cent of the total in FY2024. Import volumes climbed to $57.6 billion, reflecting an expanding economy. Similarly, plastics imports grew steadily, supporting the country’s expanding manufacturing base.

Diamonds, gold, and luxury goods remained significant, with import volumes rising to $78.6 billion. However, their share in the import basket fell from 18.1 per cent to 11.6 per cent, indicating a shift in India’s import priorities. Imports of steel and other base metals like copper grew to $46.8 billion, reflecting increased industrial and construction activity.

Agricultural imports reached $32 billion, with a share of 4.7 per cent in FY2024, reflecting growing domestic demand for specific food products. Key imports are vegetable oil ($15 billion), pulses, sugar, cashew nuts, and apples.

The Challenges

India faces a trio of external challenges that threaten its trade prospects. First, the US-China trade and tariff war, with Trump’s return in January, added further uncertainty.

Second, the European Union’s green laws, such as the Carbon Border Adjustment Mechanism (CBAM), set to impose a 20-35 per cent carbon tax from January 2026, and other European green regulations raise compliance costs for Indian exporters.

Third, India’s heavy reliance on China for industrial imports — accounting for 30 per cent of its needs — exposes critical sectors like electronics, chemicals, and renewable energy to supply chain vulnerabilities.

Domestically, high input costs, labour and logistics inefficiencies, and superficial manufacturing practices hinder India’s global competitiveness. Energy and financing costs in India are significantly higher than in China, making products like solar cells 40 per cent more expensive to produce domestically.

Rigid labour laws and reliance on foreign shipping routes inflate trade costs and timelines. At the same time, shallow ports force cargo through hubs like Colombo.

Additionally, sectors like electronics remain confined to assembly operations, relying on imported components. At the same time, labour-intensive industries such as garments and gems face stiff competition from low-cost countries.

To overcome these challenges, India must prioritise cost reductions in energy, logistics, and financing, implement labour reforms, and incentivise domestic production of critical inputs like solar cells and machinery. These measures are essential for transitioning from assembly-based exports to deep manufacturing and capturing emerging opportunities in global trade. These efforts are also crucial for realising India’s ambitious goal of reaching $1 trillion in merchandise exports by 2030.

The writes is founder of Global Trade Research Initiative