India’s overall trade expanded by 5.4 per cent in the fourth quarter of FY26, reaching $1.84 trillion, despite a decline in merchandise exports, according to NITI Aayog’s latest Trade Watch Quarterly report released on Tuesday.
The report highlighted the growing importance of the services sector in supporting India’s external trade performance. While merchandise exports fell 2.8 per cent year-on-year to $112.03 billion during Q4 FY26, imports rose 12 per cent to $195 billion. In contrast, services exports increased 9 per cent to $111 billion, outpacing the 4.1 per cent rise in services imports, which stood at $50.7 billion.
As a result, India’s services trade surplus widened significantly to $60.4 billion in Q4, up from $47.9 billion in the first quarter of FY26, helping offset the merchandise trade deficit.
“Services exports remained a key pillar of external sector stability,” the report noted, underscoring their growing role in balancing India’s trade account.
The report also pointed to the narrowing gap between merchandise and services exports. In FY26, India’s services exports reached $421 billion, compared with merchandise exports of $442 billion, reflecting the increasing contribution of the services sector to the country’s export basket.
Globally, India retained its position as the world’s eighth-largest services exporter in 2025. The country’s services exports nearly tripled over the past decade, rising from $156 billion in 2015 to $416 billion in 2025, registering a compound annual growth rate (CAGR) of 10.3 per cent, well above the global average growth rate of 6.6 per cent.
India further strengthened its dominance in telecom and IT services, with its global market share increasing from 9.5 per cent in 2015 to 14.9 per cent in 2025. The report also highlighted a diversification of export destinations, with North America’s share in India’s services exports declining from 60 per cent to 54 per cent, while Europe’s share increased from 25 per cent to 33 per cent over the same period.
In the pharmaceutical sector, India consolidated its position as a major supplier of formulated drugs. The country’s global export share in formulated pharmaceuticals (HS 3004) rose from 3.2 per cent in 2015 to 4 per cent in 2025. India’s pharmaceutical exports reached $25.8 billion in 2025, with formulated drugs accounting for $22 billion of the total.
The findings underscore the increasing resilience and diversification of India’s export ecosystem, with services emerging as a key growth engine amid evolving global trade dynamics.
