Reimagining India’s Export Pathway | 22 Nov 2025

This editorial is based on “Export subsidies will help but we should aim to be globally competitive” which was published in The Hindu Business Line on 16/11/2025. The article brings into picture the limits of India’s new export support schemes, noting that despite fresh funding, deep-rooted issues such as high logistics costs, regulatory hurdles, and weak trade integration persist. It argues that meaningful export growth will come from structural reforms and stronger global value chain participation rather than subsidies alone.

The Government of India has unveiled the ₹25,060 crore Export Promotion Mission and a ₹20,000 crore Credit Guarantee Scheme for Exporters, but past trends call for measured optimism. Despite multiple export-support initiatives over the last decade, India’s merchandise exports have struggled to achieve even a 3% CAGR, and its global market share remains stagnant at around 1.8%. The core issue lies in India’s eroding export competitiveness, driven by high logistics costs, regulatory complexities and  inverted duty structures. Sustainable export growth will depend on deeper structural reforms, regulatory simplification, trade facilitation, and stronger integration with global value chains, rather than on subsidies alone.

What Significant Developments Are Transforming India’s Export Landscape?

• Rise of High-Tech and Value-Added Exports: The Production-Linked Incentive (PLI) scheme is fundamentally reshaping India's merchandise export basket by promoting advanced manufacturing, moving beyond traditional low-value goods. 
  • This strategic push into high-tech sectors is crucial for integrating India deeper into global value chains (GVCs) and achieving greater resilience.
  • The Electronics Goods segment surged dramatically by 32.47% to reach USD 38.58 Billion in FY 2024-25, up from USD 29.12 Billion in FY 2023-24, showcasing the tangible impact of the PLI scheme and positioning the sector as the third-largest export category. (As per Electronics and Computer Software Export Promotion Council (ESC) and the Ministry of Commerce & Industry)
• Sustained Momentum in Services Exports: India maintains its leadership in the global services sector, which acts as a robust counterbalance to the cyclical volatility of merchandise trade, highlighting the strength of its skilled human capital and digital economy. 
  • This resilience is vital for maintaining the overall export momentum and a positive current account balance in the face of slowing global goods demand.
  • Services exports reached a record USD 387.5 Billion in FY 2024-25, a strong 13.6% growth over the 2023-24 period, primarily driven by the consistent performance of IT and BPO services.
• Aggressive Pursuit of Free Trade Agreements (FTAs): Strategic bilateral agreements are being rapidly finalized to secure preferential market access, counter rising protectionism, and diversify trade partners away from concentrated high-risk regions.
  • These pacts are essential for lowering tariff barriers on Indian goods, giving exporters a competitive edge in key developed and developing markets.
  • The India-UK Comprehensive Economic and Trade Agreement (CETA) and the recently operational India-EFTA (European Free Trade Association) FTA are significant, with the UK pact, targeting an increase in bilateral trade to USD 120 billion by 2030.
• Policy Focus on Non-Petroleum, Non-Gold Exports (NPG): The emphasis on non-oil and non-gold merchandise exports signifies a healthier, diversified, and more sustainable export base, reducing reliance on volatile commodity prices. 
  • This diversification into new products and new markets strengthens India's global footprint and insulates the economy from external shocks related to energy and bullion.
  • Non-petroleum exports rose by nearly 4% to USD 219.90 Billion in April-October 2025, supported by strong growth in key diversified segments like Meat, Dairy & Poultry Products and Marine Products.
• Strengthening of Logistics and Trade Infrastructure: The launch of the National Logistics Policy (NLP) and the PM GatiShakti National Master Plan aims to drastically reduce the high logistics cost for Indian exporters, enhancing their global price competitiveness. 
  • Improving connectivity through multi-modal infrastructure is paramount to achieving the ambitious export targets and streamlining supply chains from factory to port.
  • The policy aims to bring down logistics costs to a globally competitive level and improve India's rank in the World Bank's Logistics Performance Index (LPI) to among the top 25 countries by 2030, a crucial step for easing the movement of goods.
• Export Promotion Mission and Trade Finance Support: The government has launched comprehensive, outcome-driven missions to address critical pain points, particularly access to affordable finance and global market navigation for MSMEs, which form the backbone of Indian exports. 
  • This structured, single-mechanism approach, including the Export Promotion Mission (EPM), replaces fragmented schemes to respond rapidly to global trade disruptions, ensuring trade continuity.
  • The new Rs 25,060-crore EPM is being rolled out from 2025-26, with a significant component for Niryat Protsahan aimed at improving MSME access to affordable trade finance through tools like interest subvention and credit enhancement.
• Resilience Amidst Global Trade Headwinds: Indian exporters are demonstrating significant adaptability, utilizing policy support and diversifying their markets to maintain positive growth despite widespread global demand softness and new tariff barriers from major partners. 
  • The mixed performance underscores the need for continuous agility and policy support to mitigate the impact of external protectionism and geopolitical tensions.
  • Despite an 8.58% decline in exports to the US in October 2025 (compared to October 2024) following new tariffs, India's overall Total Exports (Merchandise + Services) for FY 2024-25 grew by 6.01% to a record USD 824.9 Billion, demonstrating underlying resilience.

What are the Key Issues Associated with India’s Export Sector? 

• High Logistics and Transaction Costs: India’s domestic logistics costs remain a major competitive disadvantage, eroding exporter margins and increasing the cost of goods sold on the international market, making them less attractive than those from efficient East Asian competitors. 
  • The fragmented logistics network, compounded by bureaucratic delays, contributes significantly to higher inventory holding and slower turnaround times, which directly impacts the export price.
  • While recent studies show an improvement, the logistics cost is still estimated at around 7.97% of GDP (2023-24), which is significantly higher than the global benchmark of 6-7% for developed nations, severely impacting the price competitiveness of Indian manufactured goods.
• Shallow Integration into Global Value Chains (GVCs): Indian manufacturing firms, especially MSMEs, have low participation in high-value, backward linkages of global supply chains, primarily serving as 'final product' exporters rather than integrated component suppliers. 
  • This low integration prevents exporters from benefiting from technology transfer, scale economies, and global design networks, limiting the value addition and diversification of the export basket.
  • As a result, India captures a much smaller share of GVC income compared to competitors like Vietnam or Mexico. 

• Impact of Global Demand Slowdown and Protectionism: Softening global demand in key developed markets (EU and US) and a rise in targeted tariffs and trade-restrictive measures have directly impacted demand for India’s labour-intensive and traditional export goods. 
  • This external pressure creates significant volatility, forcing exporters to diversify rapidly but often resulting in short-term export contraction in established markets.
  • India's overall Merchandise Exports contracted sharply by 11.8% year-on-year in October 2025. 
  • The slowdown has particularly hurt sectors like textiles, leather, and engineering goods, which depend heavily on Western markets. 
    • Rising geopolitical fragmentation is further reshaping global value chains, making export recovery more uncertain and uneven across sectors.
• Difficulty in Accessing Affordable Export Finance for MSMEs: Micro, Small, and Medium Enterprises (MSMEs), which contribute nearly half of India's exports, face persistent challenges in securing timely and affordable pre- and post-shipment credit.
  • Banks perceive MSME trade finance as high-risk due to delayed payment cycles and collateral requirements, hindering their ability to execute large or long-term export orders efficiently.
  • This persistent challenge is quantified by the fact that the credit gap in the MSME sector was recently estimated to be in the range of ₹20 to ₹25 lakh crore, with about 47% of MSME credit demand remaining unmet.
• Growing Threat of Non-Tariff Barriers (NTBs): Indian exporters are increasingly facing market access challenges through stringent Non-Tariff Barriers (NTBs) related to product standards, Sanitary and Phytosanitary (SPS) measures, and complex certification processes in developed markets. 
  • Compliance with evolving global quality and environmental standards, such as the EU's Carbon Border Adjustment Mechanism (CBAM), is a high-cost hurdle for many small exporters.
  • Although India's CBAM-exposed exports to the EU account for only 0.2% of the country's GDP, iron and steel make up nearly 90% of these exports and these sectors are now exposed to a new compliance cost, which could translate into higher taxes for exporters lacking certified green production processes.
• Sub-optimal Utilization of Free Trade Agreements (FTAs): Despite signing new FTAs with partners like the UAE and Australia, the actual utilization rate by Indian exporters remains low due to complex Rules of Origin (RoO) requirements, lack of awareness, and administrative overheads. .
  • Studies consistently indicate that the utilisation rate of India's existing FTAs is often below 25%, meaning a significant volume of exports could be entering partner countries at lower tariffs if exporters fully complied with the necessary documentation and local value-addition rules.

What Measures Can Drive a Sustainable Transformation in India’s Export Sector?

• Build a “Next-Generation Trade Facilitation Ecosystem”: India must move toward a seamless, paperless, single-window trade environment integrating customs, ports, GST, standards bodies, and banks to eliminate friction across the export lifecycle. 
  • A unified digital interface should leverage AI-based risk assessment, automated approvals, real-time cargo tracking, and predictive clearance systems to reduce compliance uncertainty. 
  • Harmonising border procedures across states and ports will remove the current fragmentation. Such a system institutionalized time-cost efficiency, promotes regulatory predictability, and enhances India’s reliability as a trading partner. 
    • This creates an ecosystem where exporters operate with minimal bureaucratic drag and maximum transparency.
• Accelerate Deep Integration into Global Value Chains (GVCs): India needs targeted policies to attract component manufacturing, design-intensive processes, and cross-border production mandates, moving beyond final-assembly exports. Strategic co-location of supplier networks, harmonised standards, and plug-and-play industrial clusters can anchor India into higher-value GVC nodes. 
  • Long-term supplier development programmes with global anchor firms can foster technology diffusion and operational benchmarking. 
  • Stronger intellectual property protection and regulatory stability will make India a credible destination for multi-stage production. This approach ensures that export growth is value-rich, diversified, and resilient.
• Shift from Subsidy-Led to Capability-Led Export Growth: Rather than short-cycle incentives, India must invest in institutional export capabilities, design expertise, product certification, advanced testing labs, and quality upgradation systems. 
  • A nationwide programme for export quality assurance can reposition Indian products as premium, not low-cost alternatives. 
  • Support for green transition, eco-labeling, and sustainability compliance will future-proof Indian exporters against emerging global norms. 
    • Capacity-building for MSMEs in packaging, branding, after-sales services, and intellectual property can raise global brand credibility.
    • This shift nurtures a long-term competitiveness culture instead of reliance on fiscal support.
• Create a Robust, Affordable Trade Finance Architecture: A structural reform is needed to expand risk-mitigated export credit, using blended finance, digital underwriting, and alternative credit-scoring models based on supply-chain behaviour.
  • India should scale fintech-enabled trade finance platforms that integrate exporters, banks, insurers, and customs, reducing collateral dependence. 
  • A dedicated export credit guarantee hub with risk-sharing mechanisms can reduce bank aversion to MSME trade lending. 
    • Policy stability in interest equalisation and predictable refinancing windows can improve working capital flow. These measures ensure that liquidity constraints never throttle export potential.
• Strategically Expand Market Access and Mitigate Non-Tariff Barriers: India must adopt a proactive regulatory diplomacy strategy to anticipate, negotiate, and harmonise standards with major export destinations. 
  • Building domestic capacity for conformity assessment, sustainability certification, and carbon accounting will help exporters meet evolving NTB/BAT (Border Adjustment Tax) requirements. 
  • FTAs should be complemented by real-time support cells that guide exporters on Rules of Origin, digital documentation, and compliance navigation. 
  • Strengthening India’s voice in global standard-setting forums can reduce adverse regulatory spillovers. This creates a globally aligned export ecosystem that is competitiveness-ready.
• Develop High-Productivity, Competitive Export Clusters: India should design sector-specific export ecosystems with integrated logistics, plug-and-play manufacturing, embedded skill centres, and customs facilitation zones. 
  • Cluster governance must be led by professional agencies with autonomy, performance benchmarks, and real-time problem-solving authority. 
  • Shared infrastructure-tool rooms, testing labs, R&D centres, and common logistics hubs-can drastically reduce cost disabilities. 
  • Collaboration among industry, academia, and global firms can enable continuous innovation cycles. This spatial concentration boosts scale, reduces transaction costs, and creates globally benchmarked export hubs.
• Build a Future-Ready Workforce for Global Trade: India needs a national Export Skills Mission focusing on logistics management, advanced manufacturing skills, cross-cultural communication, digital trade, sustainability compliance, and supply-chain analytics.
  • Export-linked skilling should be embedded in industrial clusters, SEZs, and training institutes with partnerships from global manufacturers. 
  • A dedicated cadre of export managers, compliance specialists, and digital-trade professionals can enhance firm competitiveness. 
    • Continuous learning frameworks and certification programmes will align Indian workers with global industry norms. A skilled workforce becomes the backbone of a resilient, innovation-driven export transformation.

Conclusion: 

India’s export revival will hinge not on episodic incentives but on deep structural reforms, capability creation, and seamless global integration. Strengthening logistics, compliance readiness, financial architecture, and workforce skills can convert India’s scale into true competitiveness. A resilient export ecosystem requires policy stability, institutional coherence, and continuous innovation.  “Nations don’t win in markets by subsidies, but by systems- where efficiency becomes culture and competitiveness becomes character.

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