economy · 2026-03-02
India is exporting more than last year
India is exporting roughly 21% of its GDP ($800Bn exports vs $4Tn economy), compared to 19% last year; this has a temporary as well as structural explanationTemporary: rupee is falling, making our exports cheaperStructural: importing countries face high switching costs to substitute Indian exports especially in electronics (think Foxconn's millions spent in opening Indian factories), pharma (regulatory approval takes years), etc.
What exports is India known for and where do our exports go?
We export electronics, pharma, engineering goods, and petroleum products in that order. The US takes 20% of our stuff, UAE takes 8%, then Netherlands and UK. Electronics includes smartphones (Apple makes iPhones here now). Engineering goods means auto parts, machinery, things with moving parts. Petroleum products is us refining crude oil and selling diesel, jet fuel to other countries.
What makes us good at exporting what we do?
Pharma: we've been making generic drugs for decades. Built up the expertise, got FDA approvals. Takes years to get those approvals, so once you're in, you're sticky.Electronics: cheap labor helped initially, but now it's the PLI scheme (govt pays companies to manufacture here). Once you build a factory, you don't just pack up and leave.Petroleum refining: we have big refineries. Buy cheap Russian crude, process it, sell to Europe. Margins matter more than origin.Engineering goods: tier 2/3 cities have manufacturing clusters. Pune for auto parts, Coimbatore for pumps. Built up over 30-40 years.
Didn't US tariffs cripple our exporters? How are we still exporting to the US?
Pharma and electronics are exempt from tariffs. They're half our exports to the US. Also, exporters diversified. Textiles that used to go to the US now go to Europe and Middle East. The rupee weakening helped too. If tariffs add 25% cost but rupee drops 10%, net pain is only 15%.
When you say exports, do you mean goods only (like toys) or services also?
Both. Goods exports are $440Bn, services are $385Bn. Services means IT, BPO, consulting. When Infosys writes code for a US bank, that's a service export. We're counting everything here
I know more exports = good, is that a fair takeaway or is there any nuance?
It depends. If you're exporting refined petroleum by just processing Russian crude, you're not building much capability. You're arbitraging a discount. But if you're exporting generic drugs, you needed years to build manufacturing, get approvals, establish quality systems. That sticks around. The first creates temporary jobs and foreign exchange. The second creates an industry.
How much value is India adding in its exports?
Mixed picture. Electronics is mostly assembly. Apple ships camera modules, screens, batteries. We put them together in a box. Value addition is maybe 10-15%. Pharma is real. We import raw materials but the manufacturing, quality control, packaging is all here. Value addition is 60-70%. Engineering goods fall in between. We make the parts but might import specialized steel or components.
To be clear, if I export $10 of toys, are those $10 counted directly in GDP?
Yes. GDP counts the full $10 even if you imported $8 worth of plastic and paint. Economists call this "gross value" vs "value added". The $10 shows up in GDP, but your actual contribution is only $2. China faced this critique for years (lots of exports, low value addition). We're somewhere in between.
Is the govt doing anything to improve value addition in exports?
The PLI scheme pays companies to manufacture locally instead of just assembling. For smartphones, it's working. Three years ago we imported camera modules, displays, batteries. Now Samsung and others make these parts in India. The govt essentially pays a percentage of sales if you increase local manufacturing. It's expensive (govt spent $30Bn on PLI) but shifts us from screwdriver assembly to actual manufacturing.
Exports are just one half, what about imports? How are they faring?
Growing faster than exports. Our import bill hit $920Bn vs exports of $825Bn. Trade deficit of $95Bn. Oil is 25% of imports, gold is 8%, electronics (phones, laptops we don't make yet) is another 10%. The gap has been widening because oil prices spiked and gold demand from Indian households stays strong regardless of price.
Where are we importing our oil from, is it Russia or the Middle East?
Russia is 35%, Middle East is 45%. Before Ukraine war, Russia was 2%. We switched because they offered $15-20 discounts per barrel. At 5 million barrels per day, that's $75-100 million saved daily. The US wants us to stop (they imposed 50% tariffs on other goods because of this), but we're still buying Russian oil, just less than peak.
Gold prices have been rising recently, has that affected our import bill?
Yes. Gold is our second biggest import after oil. We imported $70Bn of gold last year. When prices rise, import bill jumps. We import it because Indians buy it for jewelry (60%), investment (30%), weddings, festivals. It's cultural. Unlike oil (we have no domestic production), we could theoretically reduce gold imports by changing behavior, but that's not happening.
India has so many people in farming, why do we import agricultural products?
We import pulses and edible oils because domestic production doesn't meet demand. India has 120 million farmers but they grow rice, wheat, sugarcane (water-intensive, govt buys it). Pulses need different soil, oilseeds need different climate. We also import almonds, apples (can't grow in India's heat). So farming employs 45% of people but produces only 18% of GDP. It's an efficiency problem, not a headcount problem.