India’s Trade Shows Resilience Amid Global Uncertainty in Q1 FY26

India’s external trade performance remained resilient during the April–June quarter of FY26, even as global economic uncertainty, weak demand in key markets and geopolitical tensions continued to weigh on international commerce, said the latest Trade Watch Quarterly report for Q1 FY26 released here on Tuesday.

The report notes that India’s trade activity during the first quarter reflected a mixed but stabilising trend. While exports faced pressure from subdued global demand and price volatility, steady domestic activity and targeted sectoral strength helped contain volatility and support overall trade momentum.

Merchandise exports during the quarter were impacted by softer demand in advanced economies, particularly in discretionary and manufacturing-linked products.

Engineering goods, chemicals and certain labour-intensive sectors saw moderation, reflecting slower global industrial activity. However, exports of petroleum products, electronics and select agricultural commodities provided support, helped by price movements and steady overseas demand.

Imports, on the other hand, remained elevated due to strong domestic requirements. Higher inbound shipments of crude oil, capital goods and electronics reflected continued consumption demand and infrastructure-led investment activity within the country.

The report highlighted that non-oil, non-gold imports remained firm, pointing to underlying strength in domestic economic activity.

As a result, India’s trade deficit widened during the quarter, largely driven by higher import values rather than a sharp fall in exports.

The report emphasised that the widening gap was manageable and aligned with India’s growth-driven import needs, particularly in energy and capital equipment.

Services exports continued to act as a key stabiliser for India’s external sector. Software services, business services and travel-related earnings remained robust, helping offset pressure in merchandise trade.

The steady performance of services exports supported foreign exchange earnings and helped keep the overall current account position stable.

The report also underlined a gradual shift in India’s trade composition. Electronics exports continued to gain traction, supported by manufacturing incentives and diversification of supply chains.

At the same time, traditional sectors such as textiles and gems and jewellery faced headwinds due to weak global retail demand and pricing pressures.

Region-wise, trade with the US and Europe remained subdued, while exports to West Asia, Africa and parts of Asia showed relatively better traction.

The report highlighted India’s growing focus on expanding trade ties with emerging markets to reduce dependence on traditional export destinations.

Looking ahead, the report cautioned that global trade conditions are likely to remain challenging in the near term due to geopolitical risks, supply-chain disruptions and uncertain monetary policy trends in major economies.

However, India’s strong domestic demand, improving manufacturing base and steady services exports are expected to provide a cushion against external shocks.

Overall, the Trade Watch Quarterly said India entered FY26 with a stable trade outlook, supported by resilient services exports and growth-oriented imports. While export recovery may be gradual, the report noted that structural reforms, export diversification and rising competitiveness could help improve trade performance over the medium term.