Syllabus: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
Context
- India recorded a strong merchandise trade performance in November 2025.
- The improvement offers short-term relief but does not justify complacency.
Export Performance
- India’s merchandise exports grew 19.4% to $38.1 billion in November 2025.
- This was the highest November export value in the last 10 years.
- Growth occurred despite 50% U.S. tariffs, India’s biggest export market constraint.
- Exports to the United States rose 22.6% to $6.98 billion.
- U.S. exports were 10.7% higher than October 2024 levels.
Hidden Stress in Export Growth
- Export recovery reflects exporters absorbing tariff costs, not structural competitiveness.
- Exporters expect tariffs to be temporary, delaying strategic adjustments.
- Losing customers now and regaining them later is viewed as more difficult.
- Many exporters are MSMEs in labour-intensive sectors, limiting cost absorption capacity.
- Reports indicate a sharp decline in export orders for January.
Role of Rupee Depreciation
- Depreciating rupee has partially offset higher tariff burdens.
- However, India’s tariff disadvantage versus competitors remains too large.
- Supply chain realignment requires time and cannot offer immediate relief.
Import Trends and Trade Deficit
- Merchandise imports declined 1.9% to $62.7 billion in November 2025.
- Lower imports contributed to a shrinking trade deficit.
- Falling imports may signal weakening domestic demand, not import substitution.
Policy Concerns and Government Response
- Reduced imports soon after GST rate cuts warrant close monitoring.
- The government outlined an Export Promotion Mission, but details remain pending.
- Delay in notifying schemes may worsen financial stress for exporters.
Way Forward
- Credit guarantee schemes may help exporters more than loan moratoriums.
- Tariff resolution depends on the U.S. President’s decision, beyond India’s control.
- India must prepare for prolonged stress while hoping for early tariff relief.