NITI Aayog Report: 3rd Trade Watch Quarterly

NITI Aayog has released the third edition of the “Trade Watch Quarterly” publication for Quarter 3 of the financial year 2025 (October to December). The thematic focus of this quarter’s edition is the evolving US trade and tariff structures and their implications for India’s export competitiveness. 

India’s Trade Performance- Q3 FY25 (Oct–Dec 2024)

Merchandise Trade: Resilient Amidst Global Volatility

• Merchandise exports grew modestly by 3% YoY to USD 108.7 billion.
  • Notable shift: Aircraft and spacecraft entered top 10 export categories.
  • Export destinations: North America and European Union = ~40% of total.
• Merchandise imports rose 6.5% to USD 187.5 billion, widening the trade deficit.
  • Import drivers:
    • Animal/vegetable fats and oils (↑51.4%), especially soybean oil from Argentina.
    • Precious stones and pearls (↑18.6%).
  • Top sources of imports: Northeast Asia and West Asia.

Services Trade: A Key Strength

• Services exports increased by 17% YoY to USD 102.6 billion.
• Services imports rose 22.5% to USD 52.4 billion.
• Services trade surplus stood at USD 52.3 billion, partially offsetting merchandise deficit.
• India became the 5th-largest global exporter of Digitally Delivered Services (DDS) in 2024:
  • Export value: USD 269 billion.
  • Key segments: IT services, professional consulting, R&D outsourcing.

High-Tech Merchandise Export Growth

• Since 2014, high-tech exports (like electrical machinery and arms/ammunition) have shown strong performance.
• CAGR of 10.6% over the past decade.

US Trade Policy Shift – Strategic Opportunity for India

• The US introduced new tariffs (Apr–Jul 2025):
  • 10% baseline tariff on all imports.
  • Higher tariffs on specific partners: China, Canada, Mexico, Vietnam, Thailand.
• India’s exposure to the new US tariff regime is moderate.
  • However, India stands to gain export market share:
    • 61% of trade value in top 30 HS-2 product categories.
    • 52% of trade value in top 100 HS-4 product categories.

Policy Recommendations for India

To leverage the evolving trade landscape, India must pursue complementary policy measures to capitalise these advantages, including

• Promote targeted exports.
• Deepen integration into global value chains (GVCs).
• Pursue a services-focused trade agreement with the US by:
  • Building institutional frameworks on digital trade,
  • Facilitating cross-border data flows, and
  • Establishing mutual recognition agreements (MRAs).

Conclusion: Seizing the Moment

• The US remains India’s largest export destination and a vital growth corridor.
• With agile policymaking, India can capitalize on trade realignments and strengthen its global trade competitiveness.

India’s Trade Snapshot – Q3 FY25 (Oct–Dec 2024) – Key Highlights

Merchandise and Services Trade

• Merchandise Exports: Grew by 3% YoY to USD 108.7 billion
• Merchandise Imports: Grew by 6.5% to USD 187.5 billion
• Trade Deficit: USD 78.7 billion
• Services Surplus: USD 52.3 billion, driven by 17% growth in services exports

Export Composition Trends

• Aircraft, spacecraft & parts surged 200%+ YoY, entering top 10 exports due to strong demand from Saudi Arabia, UAE, Czech Republic
• Export structure still dominated by low-tech, but gradually shifting toward medium-high & high-tech

High-Tech Exports

• High-tech exports grew at a 10.6% CAGR, reaching USD 80.6 billion in 2024
• Now 18.3% of total merchandise exports
• Top high-tech export: Electrical machinery & parts (50% of segment)
  • Surpassed nuclear reactors and boilers, which led in 2014

Digitally Delivered Services (DDS)

• DDS exports more than doubled over the decade
• Reached USD 269 billion in 2024, making India the 5th-largest global exporter
• DDS composition (2024):
  • Other Business Services = 53%
  • Computer Services = 39%
  • Aligns with global service export trends

US Tariff Regime – Strategic Advantage for India

• In the current US tariff regime, at the HS 2 level, India is expected to gain competitiveness
  • India expected to gain in 22 out of top 30 categories
  • Covers 61% of exports to US and 68% of total US imports
• Similarly at HS-4 Level, India enjoys
  • Competitive edge in 78 out of top 100 products
  • Covers ~52% of India’s US-bound exports

India’s Tariff Edge Over Global Competitors

• India gains competitiveness over China, Mexico, Canada in key sectors:
  • Nuclear reactors, iron & steel, textiles, electricals, vehicles
• In 6 out of 30 HS-2 categories where India faces slightly higher tariffs,
  • Average tariff disadvantage is only 1%
  • India remains broadly competitive

Emerging Export Opportunities

• Due to realigned US tariffs, India can gain in:
  • High-value sectors: Electronics, nuclear reactors
  • Labour-intensive goods: Apparel, textiles