What Happened
- India's total exports (merchandise and services) grew 8.5% in the July-September quarter (Q2) of FY2025-26, according to NITI Aayog analysis
- Both merchandise and services exports grew at approximately 8.5% each, while import growth remained moderate at 4.5%
- Electronics has emerged as the second-largest item in India's export basket, with mobile phone exports approaching $50 billion
- Top export regions — North America and the European Union — accounted for 89% of shipments, growing 7.7% year-on-year
- The Economic Survey 2025-26 noted electronics exports at $22.2 billion in the first half, poised to become India's second-largest export category
Static Topic Bridges
India's Export Composition and Structural Shift
India's export basket has undergone a significant structural transformation over the past decade. Traditional exports like gems and jewellery, textiles, and agricultural products have been complemented — and increasingly overtaken — by electronics, pharmaceuticals, and IT services. Electronics exports, driven primarily by smartphone assembly under the PLI scheme, surged from approximately $11 billion in FY2020 to over $47 billion in CY2025. Services exports have doubled in the past decade, crossing $387.5 billion in FY2025, with IT/BPM leading but financial and professional services gaining share.
- Top merchandise exports (FY25): Petroleum products, electronics (smartphones), gems and jewellery, pharmaceuticals, organic chemicals
- Electronics exports: ~$47 billion in CY2025 (smartphones alone: largest component)
- Services exports: $387.5 billion in FY2025 (IT/BPM dominant; financial, professional, digital services growing)
- India's share in global merchandise exports: approximately 1.8%
- Cumulative exports (Apr-Dec 2025): estimated $634.26 billion (4.33% growth)
Connection to this news: The 8.5% Q2 growth reflects this structural shift, with electronics increasingly compensating for slower growth in traditional export categories and making India's export profile more diversified.
Production Linked Incentive (PLI) Scheme and Manufacturing Exports
The PLI scheme, launched in 2020, provides financial incentives (4-6% of incremental sales) to companies that manufacture in India and achieve specified production targets. It was initially introduced for mobile phones and electronic components, then expanded to 14 sectors including pharmaceuticals, automobiles, food processing, textiles, solar modules, semiconductors, and drones. The scheme aims to reduce import dependence, create manufacturing jobs, and boost exports.
- PLI covers 14 sectors with a total outlay of approximately Rs 1.97 lakh crore
- Mobile phone PLI: Led to Apple's iPhone assembly expansion in India (Foxconn, Pegatron, Tata Electronics)
- Electronics components: Budget 2026-27 allocated Rs 40,000 crore for electronic component manufacturing
- Pharma PLI: Targets bulk drug parks and medical device manufacturing
- Key success metric: Mobile phone exports rose from ~$3 billion (FY2020) to approaching $50 billion
Connection to this news: The electronics-led export growth highlighted by NITI Aayog is directly attributable to PLI scheme outcomes, particularly in smartphone assembly, validating the government's industrial policy approach.
Balance of Trade and Current Account Dynamics
The balance of trade is the difference between a country's exports and imports. India has historically run a merchandise trade deficit (imports exceeding exports), offset partially by a services trade surplus. The current account balance includes trade in goods and services plus net income transfers and remittances. A narrowing trade deficit — as indicated by the 8.5% export growth versus 4.5% import growth in Q2 — improves the current account position, reduces dependence on foreign capital inflows, and strengthens the rupee.
- India's merchandise trade deficit (FY25): approximately $240 billion
- Services trade surplus (FY25): approximately $175 billion
- Net current account deficit (FY25): approximately $25-30 billion (around 1% of GDP)
- Major import items: Crude oil, gold, electronics, coal, machinery
- Remittances from diaspora: approximately $120 billion (FY25), largest in the world
Connection to this news: The asymmetry between 8.5% export growth and 4.5% import growth in Q2 suggests an improving trade balance, which could support current account sustainability and reduce vulnerability to external shocks.
Key Facts & Data
- Q2 FY2025-26 export growth: 8.5% (both merchandise and services)
- Q2 FY2025-26 import growth: 4.5%
- Electronics exports in CY2025: approximately $47 billion
- Electronics exports (H1 FY26 per Economic Survey): $22.2 billion
- Top export regions: North America and EU (89% of shipments, 7.7% YoY growth)
- Cumulative exports (Apr-Dec 2025): $634.26 billion (4.33% growth)
- PLI scheme sectors: 14; total outlay: approximately Rs 1.97 lakh crore
- Budget 2026-27 electronic component manufacturing allocation: Rs 40,000 crore