India’s export pulse

India’s merchandise exports to the United States fell by around 12% year-on-year, while the services engine—usually India’s cushion—also slowed. Together, they widened the overall trade deficit, even as oil prices and freight costs stayed volatile.

What changed

• Goods side: Softer orders in gems & jewellery, textiles, and chemicals. Electronics held up but couldn’t offset the overall decline.
• Services side: A pause in global tech and consulting spends trimmed software and business services; travel inflows moderated after a strong rebound.
• Prices & finance: A firmer dollar, higher shipping costs on some routes, and cautious U.S. retail inventories weighed on receipts.

Why this matters

• A weaker services surplus plus lower goods exports put pressure on the current account balance.
• Slower cashflows affect working capital for micro, small, and medium exporters and may delay hiring in IT-enabled services.

Policy levers in play

• Market & product de-risking: Deepen trade ties with the Middle East, Africa, and Latin America; move up the value chain in medical devices, electronics, and machinery.
• Export cushions: Ensure quick refunds under RoDTEP/RoSCTL, expand interest equalisation for small firms, and speed up ECGC cover.
• Logistics & standards: Fix last-mile bottlenecks via PM Gati Shakti, paperless port systems, and Mutual Recognition Agreements (MRAs) for testing/quality.
• Services push: Strengthen IndiaAI Mission and data-centre incentives to boost cloud/AI exports; negotiate digital trade chapters and easier visa norms in FTAs.
• Credit & risk: Provide hedging support and blended trade finance access for smaller exporters.

Key terms

• Trade deficit: When imports exceed exports.
• Current account: Sum of trade in goods/services plus transfers and income.
• Services surplus: Exports of services minus imports of services.
• Terms of trade: Ratio of export prices to import prices.
• Interest equalisation: Subsidised export credit to enhance competitiveness.

Exam hook — Takeaways

Exports to one market can swing overall performance; services cannot always absorb the shock. De-risk markets, speed up refunds, and upgrade quality/logistics to stabilise the external account.

UPSC Prelims question

The services surplus helps India:

1. Narrow the current account deficit
2. Expand the fiscal deficit
3. Reduce capital inflows
4. Raise customs revenue

Answer: (a)

One-line wrap

Broaden markets, move up the value chain, and keep services competitive—the twin engine must run together to steady the external account.