India is aiming to hit a key target this year: $1 trillion in exports. Calling it an ‘ambitious target’, Commerce minister Piyush Goyal has said that around 16-17% growth in merchandise exports needs to be achieved to hit the figure. The $1 trillion target includes both goods and services exports.Goyal said that while 11% growth in services is being targeted, it is merchandise goods that need to contribute to the bigger growth number. He has said that $530 billion in goods and $470 billion in services exports is being targeted for FY 2026-27.“We want to grow to $1 trillion export this year. And to reach $1 trillion, our goods export will have to increase from $442 billion to about $530 billion, $90 billion increase,” Goyal said on Friday. During the April-June quarter, exports saw a 15% growth in merchandise shipments and around 11% in services exports.Which sectors have contributed to exports growth? What role has the PLI scheme played and will trade deals help expedite growth? We decode:
Trendline in Exports
The growth trajectory of Indian exports reflects two distinct phases. During FY01–FY12, exports of goods and services recorded robust CAGRs of 19.8% and 21.8%, respectively.In contrast, growth moderated during FY12–FY26, with corresponding CAGRs of 2.6% for goods and 8.1% for services. DK Srivastava, Chief Policy Advisor at EY India, this latter period coincided with a significant shift in the global trade environment, marked by rising protectionism, geopolitical uncertainties, supply chain realignments, and a gradual move away from the earlier momentum of trade globalization. “Despite these challenges, India has continued to strengthen its position in global markets through a proactive trade and investment strategy. The expansion of bilateral and regional trade agreements, coupled with efforts to integrate more deeply into global value chains, is expected to create new opportunities for export growth and market diversification,” he says. In this backdrop the $1 trillion exports milestone assumes significance.
When will India hit the $1 trillion exports milestone?
India’s total exports in FY26 – which consists of exports of goods as well as services – stood at $0.87 trillion. In this, exports of goods contributed around $0.45 trillion and services were at $0.42 trillion. DK Srivastava says that the likelihood of this volume going up to $1 trillion in FY27 is quite high. “The required growth rate in FY27 in the total value of exports is 15.3%. Already in the months of April and May 2026, goods exports have shown y-o-y growth rates of 13.8% and 18.0% respectively – and this is when these months were affected by the West Asian crisis,” he tells TOI.He sees two factors helping India’s exports.First, the extensive list of countries or economic groupings with which India has successfully entered into bilateral free trade agreements would provide higher growth to Indian exports in spite of prospects of some global growth slowdown. Secondly, if the last three quarters of the fiscal year witness normalisation of crude supply and prices, it will help better utilization of Indian capacities of producing both goods and services.However, some experts see the $1 trillion target being realised in the coming fiscal years and not the current one.“The $1 trillion milestone is within reach. If global trade conditions remain broadly stable and no major geopolitical or economic shocks occur, India could cross the $1 trillion mark by FY2027–28,” says Ajay Srivastava, founder of Global Trade Research Initiative (GTRI),
Which sectors will contribute?
The services sector has been a big driver of exports for India and that trend is expected to continue.Services exports rose 7.9% to $418.3 billion in FY2025–26, nearly matching merchandise exports of $441.8 billion. According to Ajay Srivastava of GTRI, at current growth rates, services exports could surpass goods exports within two years, although India must adapt its IT and business-services sector to the disruptions posed by artificial intelligence.For services, four prominent categories; telecommunications, computer, and IT Services, other business services, transport and travel services together account for nearly 94% of service exports. Of this, telecommunication et al. alone accounts for nearly 49% of total services exports. Experts believe that within the goods basket sectors such as engineering goods, petroleum products, electronic goods, drugs and pharmaceuticals, chemicals and gems and jewellery will drive the maximum push. These categories of exports account for around 71% of total goods exported by India. Electronics is emerging as India’s fastest-growing manufacturing export sector, led by smartphones, telecom equipment, and electronic components. Electronics already contributes as the third biggest merchandise exports category and IT minister Ashwini Vaishnaw has said that the aim is to take it to the second spot in the coming years.Meanwhile, some of the above sectors have witnessed a growth slowdown or a contraction in FY26. Exports of gems and jewellery have shown a negative growth in the last several years. “In incremental terms, we expect the remaining nine sectors of goods and services to contribute to overall exports growth particularly after the normalization of the supply and prices of crude oil and other primary goods flowing through the Strait of Hormuz. One interesting sector relates to defence exports which has shown growth of 62.7% in FY26 in value terms,” says DK Srivastava.“Machinery exports are also expanding as global firms diversify supply chains beyond China. Continued investment, scale, and integration into global value chains will be critical to sustaining momentum,” he says.
The Role of Production-Linked Incentive Scheme
Back in 2020, when the global economy was reeling from a shutdown due to Covid, to enhance self-reliance and reduce dependency on global supply chains, India launched the Production Linked Incentive (PLI) scheme. In some sectors, especially electronics, that has proven to be a boon for exports. According to government data, the PLI scheme has led to exports of over Rs 8.3 lakh crore.
What role has PLI played?
Sectors which have attracted highest PLI outlays include electronics manufacturing, automobiles and auto components, high efficiency solar PV modules and ACC batteries, IT hardware and Pharmaceuticals. “All of these sectors are export oriented. PLI has helped attract investment in these sectors and as capacities increase, exports prospects also increase. The result is evident: engineering goods, pharmaceuticals and electronics play a core role in India’s export performance,” says DK Srivasatava.
Impact of PLI: Which sectors have benefitted?
Miren Lodha says that the medium-term upside for exports will be supported by announced government schemes. These include electronics and components under the Production Linked Incentive scheme and the Electronics Components Manufacturing Scheme; semiconductors under the India Semiconductor Mission; solar photovoltaic modules; advanced chemistry cell batteries; electric vehicles and auto components; defence manufacturing; and aerospace components.
Benefits of Trade Deals
Even as a trade deal with its largest trading partner – the US – is in works, India has finalised several free trade agreements (FTAs) and bilateral agreements in the last few quarters. The diversification of its export destination would serve a key role in driving growth.As the EY expert notes: Geopolitical shifts, particularly the shift in the US policies placing heavy reliance on unduly high tariff rates and associated uncertainties have not been helpful for growth of global trade and for India’s exports. “Volatility in crude oil prices and uncertainty in its supplies has also critically affected global demand for Indian exports and unit costs for Indian exports. In this context, India’s strategy to emphasise trade based on bilateral free trade agreements is expected to play a critical positive role,” says DK Srivastava.India itself has shown considerable preference for bilateral free trade agreements. So far, it has successfully negotiated major bilateral free trade agreements, in one form or another, with 18 countries or economic groups.India is also a signatory to seven multilateral trade blocs including SAARC, ASEAN and SAFTA.
“Trade amongst BRICS countries and the use of local currencies for intra-group and between countries would also augment India’s export growth,” DK Srivastava adds.How do trade agreements help? Miren Lodha, Senior Director, Crisil Intelligence sees free trade agreements as a major enabler, as they improve market access and directly reduce India’s tariff disadvantage in key export markets. India now has preferential access to more than half of global import markets. This share could rise further once a trade agreement with the US is finalised.“The immediate beneficiaries of FTAs are expected to be readymade garments, leather and footwear, gems and jewellery, and chemicals. These sectors stand to gain from tariff elimination or reduction in the EU and UK markets, helping India narrow the cost gap with competitors such as Bangladesh, Vietnam, and China. For labour-intensive exports, FTAs can therefore provide a direct competitiveness boost,” Lodha tells TOI.But, GTRI’s Srivastava cautions that less than 20% of global trade takes place through preferential tariff routes under FTAs. “Factors such as competitiveness, scale, quality, logistics, and participation in global value chains play a much larger role,” he says.“Because India’s MFN tariffs are generally higher than those of its trading partners, FTAs typically require India to make deeper tariff cuts, resulting in greater market access for partner-country exports than for Indian goods. This results in rising imports and widening trade deficits,” he explains.“Geopolitical shifts and supply-chain diversification away from China may create opportunities for India, but capturing them will depend far more on improving domestic manufacturing competitiveness than on signing additional FTAs,” he adds.
Challenges and Road Ahead
While the milestone, when achieved, would be a big one, it’s also important to recognize the changing global dynamics and adapt strategies accordingly. The biggest area that experts feel should be in focus is: building deeper domestic manufacturing capabilities.According to Ajay Srivasatava, the single most important reform would be to make manufacturing the centerpiece of India’s export strategy. “India should systematically promote domestic production through reverse engineering, product adaptation, and incremental innovation, enabling local firms to manufacture a much wider range of products already traded globally,” he says.Experts advocate deepening domestic manufacturing value chains and raising domestic value addition across export-oriented sectors. “India needs to move further into components, sub-assemblies, design, testing, certification, tooling, specialised materials, and supplier ecosystems. This would improve cost competitiveness, reduce import dependence, and make Indian exports more resilient to external shocks,” says Lodha.The electronics sector offers the clearest template. Smartphone exports have scaled up meaningfully, supported by the PLI scheme.“However, the next phase of competitiveness will depend on component localisation through the Electronics Components Manufacturing Scheme. Similar value-chain deepening is required in semiconductors through the India Semiconductor Mission, batteries through the Advanced Chemistry Cell PLI, solar modules through solar manufacturing incentives, and defence through indigenisation and domestic procurement-linked manufacturing,” he says.Domestically, EY’s Srivasatava sees scope for further improvement in logistics efficiency and the ease of doing business. In an increasingly turbulent global environment, India is pushing to keep its exports engine going. There are pockets of success – like electronics – and there are challenges that remain. Going ahead, continuous policy reforms and dynamic strategies to strengthen domestic manufacturing base and at the same time keep the services exports going in an AI adapting world, would be crucial to success.
