Composition of India’s Foreign Trade: Exports and Imports Analysis

Every time you fill your car with petrol, buy an imported smartphone, or see “Made in India” pharma exports making headlines, you are looking at a small piece of a much larger story. That story is the composition of India’s foreign trade: what exactly the country sells to the world and what it buys back. This composition is not static. It shifts every decade as industries mature, consumption patterns change, and India’s role in global manufacturing evolves. Understanding this shift tells you more about the health of an economy than the trade figures themselves ever could.

What “composition of trade” actually means 🔗

Composition of foreign trade refers to the mix of goods and services that make up a country’s exports and imports, broken down by category, such as manufactured goods, agricultural products, minerals, or capital equipment. Two countries can have identical trade values but very different economic stories depending on what is inside those numbers. A country exporting mainly raw cotton is in a different position from one exporting finished garments, even if the export bill is the same size.

For India, total exports of goods and services during FY 2025-26 are estimated at around US$860 billion, while total imports touched close to US$979 billion, leaving an overall trade deficit of roughly US$119 billion. Merchandise, meaning physical goods rather than services, accounted for exports of about US$442 billion against imports of nearly US$775 billion, pushing the merchandise trade deficit to about US$333 billion. These headline numbers set the stage, but the real insight lies in what makes up each side of the ledger.

How India’s export basket has changed over time 🔗

At independence, Indian exports were dominated by primary and low-value goods: tea, jute, raw cotton, spices, and other agricultural produce. Manufactured goods formed only a small share, and the economy exported largely what it grew or extracted, not what it built. This pattern held for decades under an import-substitution strategy that focused inward rather than on competing globally, as outlined in detailed reviews of India’s post-independence trade policy.

The 1991 liberalisation reforms changed this trajectory. Trade barriers came down, industries were exposed to global competition, and exporters gained the incentive to move up the value chain. Since then, India’s export basket has shifted from traditional agricultural and low-value goods toward high-value manufacturing and services, particularly in IT, pharmaceuticals, and engineering products.

Manufacturing and engineering goods lead the way 🔗

Engineering goods, covering machinery, auto components, industrial equipment, and transport parts, form one of the largest categories in India’s merchandise exports today. This sector has grown from around US$62 billion in FY2014 to roughly US$117 billion by FY2024, reflecting the steady deepening of India’s industrial capacity under initiatives like Make in India. Electronics exports have grown even faster in percentage terms, rising to nearly US$48 billion in FY 2025-26 from about US$39 billion a year earlier, aided by production-linked incentive schemes that have pulled global electronics assembly into the country.

Gems, jewellery, and the petroleum surprise 🔗

Gems and jewellery remain a classic Indian export strength, built on the country’s dominance in diamond cutting and polishing. Exports in this category touched around US$30 billion in FY 2024-25, with the United States and UAE as the largest buyers.

What surprises many students is that petroleum products, refined fuels like petrol, diesel, and aviation turbine fuel, have become one of India’s largest single export categories. India imports crude oil but has built massive refining capacity, allowing it to process crude and re-export finished fuel at a profit. This reflects a structural change worth noting: a study on the direction and composition of Indian trade found that the share of petroleum and crude products in overall exports rose substantially even as the share of manufactured goods eased slightly, signalling India’s growing strength in refining rather than a weakening of its manufacturing base.

Textiles and other steady contributors 🔗

Textiles continue to hold a large place in the export basket, spanning cotton yarn, fabrics, garments, and made-ups. Along with pharmaceuticals, which supply generic medicines to over 200 countries, and agricultural exports like rice, spices, and marine products, these sectors provide diversification so that a downturn in any single category does not derail overall export performance. Government data for the April-November 2025 period showed double-digit growth across several of these lines, including gems and jewellery, engineering goods, pharmaceuticals, and chemicals, indicating that the export base is broadening rather than depending on one or two star performers.

The rising weight of capital-intensive exports 🔗

A distinctive feature of the past decade is the growing share of capital-intensive and technology-driven products, engineering goods, electronics, machinery, and refined petroleum, at the expense of simple, labour-intensive categories. This is a marker of industrial maturity. Economies typically move from exporting raw materials, to labour-intensive light manufacturing, to capital and technology-intensive goods as their industrial base deepens. India’s export mix increasingly reflects the middle and later stages of that transition, even though labour-intensive sectors like textiles and handicrafts remain important employment generators.

What India actually buys from the world 🔗

If exports tell you what a country is good at producing, imports tell you what it still needs. India’s import basket has always been shaped by a basic reality: the country does not produce enough crude oil to meet its own energy demand. Only about 10 percent of the petroleum crude oil India requires is domestically produced, with the remaining 90 percent met through imports. This single dependency shapes the entire import bill and explains why global crude prices have an outsized effect on India’s trade deficit and currency.

A snapshot from mid-2026 illustrates how these categories move together. In June 2026, petroleum and crude oil imports rose 23 percent year-on-year to about US$19.32 billion, electronic goods imports jumped nearly 44 percent to US$13.36 billion, and gold imports climbed 47 percent to close to US$2 billion. Commerce ministry officials attributed much of this surge to higher global prices for crude oil and precious metals rather than a genuine rise in import volumes, a useful reminder that import bills can swing sharply due to price effects alone, without any real change in consumption.

The shift toward capital and intermediate goods 🔗

Beyond the headline items, a quieter but equally important shift has been underway: imports have moved increasingly toward capital goods and intermediate goods rather than finished consumer products. Capital goods include machinery and equipment used to build factories and infrastructure, while intermediate goods are inputs like chemicals, components, and semi-finished materials that get processed further inside India before becoming a final product or an export itself.

This pattern is a sign of industrial expansion rather than consumption-driven excess. An economy importing mainly finished consumer goods is spending on immediate use; an economy importing machinery and industrial inputs is investing in future production capacity. India’s Economic Survey analysis for FY 2025-26 notes that merchandise imports increased due to demand for capital goods and intermediates, and that rising imports of intermediates indicate deeper integration into global value chains. In other words, Indian factories are importing components, assembling or refining them, and in some cases exporting the finished output, exactly as seen with petroleum refining and electronics assembly.

Why this composition matters for the economy 🔗

The composition of trade shapes vulnerability as much as opportunity. Heavy reliance on crude oil imports means that a spike in global oil prices directly widens India’s trade deficit and pressures the rupee, regardless of how well domestic industries are performing. At the same time, a growing share of capital and intermediate goods in imports, paired with rising capital-intensive exports, suggests an economy that is industrialising and embedding itself into global supply chains rather than simply consuming what it cannot produce.

Non-petroleum and non-gems-and-jewellery exports, essentially a proxy for the health of India’s core manufacturing outside the two most volatile categories, grew to nearly US$360 billion in FY 2025-26, a signal that diversified, value-added manufacturing is gaining ground steadily rather than depending on a couple of commodity-linked sectors.

What do you think? 🔗

What do you think? If India’s imports are increasingly capital and intermediate goods rather than finished consumer products, does that change how you would interpret a rising trade deficit? And given India’s near-total dependence on imported crude oil, what kind of policy response would you consider more effective in the long run: boosting refining and petrochemical exports further, or accelerating investment in renewable energy to cut import dependence altogether?

References

1. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2252272&lang=1&reg=3
2. https://www.dalvoy.com/en/upsc/mains/previous-years/2025/management-paper-ii/indias-foreign-trade-performance-export-constraints
3. https://swadeshishodh.org/indias-foreign-trade-since-1991-trends-and-directions/
4. https://www.investindia.gov.in/team-india-blogs/make-india-world-top-exports-fueling-indias-growth-story
5. https://www.careratings.com/upload/NewsFiles/Studies/India's%20foreign%20Trade%20-%20Composition%20%20Direction.pdf
6. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2204071&reg=3&lang=1
7. https://www.dataforindia.com/trade/
8. https://www.businesstoday.in/latest/economy/story/crude-oil-electronics-and-gems-and-jewellery-top-three-imports-adding-to-trade-deficit-542612-2026-07-13
9. https://claritydeskhub.com/indias-external-sector-trade-forex-balance-of-payments-economic-survey-202526/