CMIE Warns of Export Dip in Dec Quarter; Calls for Diversification Beyond US Market

India's merchandise exports may decline significantly in the December quarter of the current fiscal year 2025-26 due to the US's 50 percent high tariff. To avoid this loss, India will have to explore alternative markets in the near future.

According to a report by the Centre for Monitoring Indian Economy (CMIE), India has been facing pressure on its export front for two years due to global uncertainty and other external challenges. The Trump government's shutdown could further aggravate the situation, as the US is a major trading partner of India. If India does not explore alternative markets in the near future, its exports could decline by five percent in the December quarter, equivalent to $103.3 billion.

India's exports declined by approximately three percent in the 2023-24 fiscal year, while they remained nearly stable in the 2024-25 fiscal year. During the April-August period of the current fiscal year, 2025-26, India's exports registered a marginal increase of 2.3 percent. During this period, exports to the United States increased by 18 percent.

Interestingly, during the April-August period of 2025-26, India's exports to China and Hong Kong increased by 19.6% and 26.3%, respectively, year-over-year. The CEO of NITI Aayog recently stated that India needs to increase its exports to China. However, no diversification measures will compensate for the projected decline in exports to the United States. A fifth of India's total exports are sent to the United States, a significant increase compared to other countries.

Exports of gems and jewelry, textiles, and marine products are expected to be most affected. Other sectors, including machinery and equipment, transportation equipment, organic/agricultural chemicals, leather, and plastics, are also likely to be significantly impacted. Furthermore, petroleum exports may also decline in the December quarter due to falling global prices.

The overall decline in exports may be partially offset by two key sectors: electronics and pharmaceuticals. These sectors are expected to perform well on the export front.

CMIE estimates that India's gems and jewelry exports could decline 20.9 percent year-on-year to $5.9 billion in the December quarter. A five percent decline is expected in the September quarter. Significantly, this sector has been experiencing a decline in exports for the past three years.