India's exports Accelerate to $950 billion in FY27 on West Asia trade pacts

India’s exports are expected to rise to $840–850 billion in FY26 and $950 billion in FY27, driven by FTAs, services and electronics. While textiles and manufacturing show promise, exporters face risks from US tariffs, EU climate rules and AI-led disruption. West Asia is seen as the main near-term growth driver.

India’s combined exports of goods and services are projected to climb sharply over the next two financial years, with total shipments estimated at $840–850 billion in FY26 and potentially touching $950 billion in FY27. Exporters attribute this optimism to the growing network of free trade agreements (FTAs), particularly with West Asian partners, along with sustained strength in services and technology-oriented industries such as electronics.

At the same time, industry voices caution that the global trade environment remains challenging. Increasing tariff barriers, along with climate-related trade measures being adopted by major economies, are expected to test India’s ability to maintain a strong export trajectory.

According to Ajay Sahai, director general of the Federation of Indian Export Organisations (FIEO), the most difficult phase for Indian exports has passed. He noted that technology-driven segments are likely to outperform traditional sectors in the coming years. Sahai expects exports in 2025–26 to fall within the $840–850 billion range, followed by a further rise to around $950 billion in FY27.

Exporters also pointed out that disruptions from the Red Sea crisis have largely eased, and the industry has adjusted to the steep 50% tariffs imposed by the United States. With support from the government’s Export Promotion Mission, companies are increasingly diversifying both their product offerings and destination markets to reduce reliance on a few regions.

The outlook for textiles and apparel appears relatively positive. Sanjay K. Jain, managing director of T T Ltd, said exports from the sector could grow by 10–20% next year. He attributed this to the expected implementation of the India–UK free trade agreement, alongside domestic policy measures such as GST rationalisation, the removal of certain quality control orders, and access to duty-free cotton, all of which are improving the industry’s fundamentals.

Electronics manufacturing is another bright spot. Now the country’s third-largest export segment—up from seventh place a decade ago—the sector is expected to record strong shipment growth in the coming year, reflecting India’s expanding role in global supply chains.

Official estimates show that India’s cumulative exports of merchandise and services during April–November FY26 reached $562.13 billion, marking a 5.43% increase from $533.16 billion in the same period last year.

On the policy front, New Delhi concluded three major trade agreements in 2025, including deals with the UK and Oman, and finalised negotiations with New Zealand. The India–UK Comprehensive Economic and Trade Agreement (CETA) is slated to take effect in 2026. Even so, exporters remain guarded, hoping for an early bilateral trade pact with the US and meaningful progress toward an agreement with the European Union.

Industry observers note that FTAs typically take time to translate into tangible export gains. While benefits are expected to become more visible next year, labour-intensive sectors may face pressure from US tariffs. With demand growth in Europe relatively subdued, exporters see West Asia as the key driver of near-term expansion.

Within services, the IT sector faces uncertainty due to the increasing adoption of artificial intelligence, which could alter demand patterns. Manu Gupta, chairman of the Toy Association of India, highlighted concerns over the US market, India’s largest export destination. He said uncertainty around American tariffs has already prompted some original equipment manufacturers to shift tool-making activities, such as mould production, from India to countries like Vietnam and Indonesia.

Exporters believe the 50% US tariffs will restrict new textile orders, though a significant portion—around 50–60%—of existing business with the US is expected to continue. A strengthening currency could offer some relief. Additionally, once the FTA with New Zealand becomes operational, access to lower-cost wool imports is likely to support domestic textile manufacturers.

Representatives from the apparel industry added that sourcing raw materials from new FTA partners could help eliminate issues related to inverted duty structures, improving overall competitiveness.

However, new regulatory costs are emerging in Europe. From January 1, 2026, the European Union’s Carbon Border Adjustment Mechanism (CBAM) will shift from a reporting requirement to a payment regime. As a result, every shipment of Indian steel and aluminium entering the EU will incur an additional carbon-related charge, adding another layer of complexity to India’s export outlook.