Trade Watch Quarterly report
Why in news?
NITI Aayog released the fifth edition of its Trade Watch Quarterly report on January 6, 2026, covering Q1 FY26 (April-June 2025). This latest report analyzes India's merchandise and services trade performance amid global shifts, and trade deficit surge with FTA countries.
Key Highlights from the Report (Q1 FY26)
- Exports Performance
- Technology-intensive exports (electronics, machinery, chemicals) showed significant growth.
- Automotive exports were analyzed in detail, focusing on competitiveness and structural strengths.
- Services exports continued to be a major driver, especially IT and business services.
- Imports Trends
- Import composition is shifting toward capital goods and intermediate inputs, signaling deeper integration into global supply chains.
- Energy imports remained steady, but diversification efforts are visible.
- Structural Shifts
- India’s trade basket is becoming more diversified and value-added.
- Stronger role of global value chains (GVCs) in shaping India’s import-export dynamics.
- Policy Insights
- The report emphasizes the need for competitiveness in automotive and technology sectors.
- Advisory board includes experts from WTO, ICRIER, IIFT, UNESCAP, and Johns Hopkins University, ensuring a global perspective.
Key Findings on FTA Countries (Q1 FY26, April–June 2025)
- Trade Deficit Surge
- India’s trade deficit with FTA partners rose 59% year-on-year, reaching $26.7 billion.
- Imports from FTA countries grew 10% to $65.3 billion, while exports fell 9% to $38.7 billion.
- Sectoral Trends
- Electronics exports stood out as a bright spot, showing resilience and global competitiveness.
- Automotive exports were highlighted as needing stronger competitiveness to balance FTA trade flows.
- Imports were driven by energy and intermediate goods, reflecting demand recovery skewed toward imported inputs.
FTAs Signed
- In 2025, India signed FTAs with the United Kingdom and Oman, concluded negotiations with New Zealand, and saw the TEPA with EFTA nations (Iceland, Liechtenstein, Norway, Switzerland) enter into force.
- Despite these agreements, early data shows exports contracting while imports expand, raising questions about India’s readiness to leverage FTAs effectively.
Implications
- For India’s economy: Rising deficits with FTA partners suggest India is importing more than it exports, especially in energy and capital goods. This could strain the current account balance.
- For policy: NITI Aayog stresses the need for greater competitiveness in existing FTAs, tariff rationalization, and production reorientation toward high-demand sectors like passenger vehicles.
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