Trade Observation - Quarter (October-December [Q3] of Fiscal Year 25)

QUARTERLY 1October-December (Q3) FY25 TRADE WATCH QUARTERLY, Quarterly Report for the FY25 Copyright@ NITI Aayog, 2025 Published: July 2025 NITI AayogGovernment of IndiaSansad Marg, New Delhi-110001, India TRADE WATCH QUARTERLY October-December (Q3) FY25 Dr. Pravakar SahooSenior Advisor (Economics & Finance–I)National Institution for Transforming India (NITI Aayog)Government of India Acknowledgement In the backdrop of rising geo-economic fragmentation, digitalisation of trade, and shifting globaldemand patterns, the need for real-time, data-driven trade monitoring has never been morecritical. TheTrade Watch Quarterly (TWQ)is a strategic knowledge product that seeks to bridge With its thematic spotlight on emerging global tariff trends because of US trade policy in recentmonths and India's export positioning, this edition aims to analyse how these shifts influenceIndia's relative competitiveness and open new avenues for export expansion. It further examinesIndia's positioning in high-technology and digital services exports, highlighting potential areas I would like to take this opportunity to express my deep gratitude to Shri Suman Bery, ViceChairman, NITI Aayog, whose encouragement and support have been crucial in driving ourefforts. I am immensely thankful to Shri B.V.R. Subrahmanyam, CEO, NITI Aayog, for hisvisionary leadership and steadfast commitment, which have played a central role in shaping this I thank all the members of NITI Aayog for their support and valuable contributions to thisinitiative. The successful completion of this report is a testament to the collective efforts of theEconomics & Finance–I vertical. I would like to sincerely thank Shri Amit Verma, JyotikaNagvanshi, Mala Parashar, Pooja Teotia, Apica Sharma, Abhilasha Manda, Salome Sara Philips, We hope this edition of Trade Watch serves as a valuable resource for navigating the shiftingcontours of global trade and guiding strategic decisions in India’s journey to becoming a leading New Delhi ADVISORY BOARD EXECUTIVE SUMMARY International trade is a powerful catalyst for economic growth, productivity, andlong-termdevelopment across nations.India’s trade performance in Q3 FY25 Merchandise exports registered a modest year-on-year growth of 3%, reaching USD108.7 billion. The export composition remained largely stable, with notable shiftssuch as the rise of aircraft and spacecraft into the top ten export categories. NorthAmerica and the European Union regionally continued to account for approximately The services sector continued to demonstrate strength, with exports rising by 17%year-on-year to USD 102.6 billion and imports increasing by 22.5% to USD 52.4 billion.This resulted in a services trade surplus of USD 52.3 billion, offering partial offset tothe merchandise imbalance. Additionally, India ranked as the world’s fifth-largest The thematic focus of this quarter’s edition is the United States’ evolving trade policy,notably the introduction of the current US tariff regime since April 2025 till 10thJuly’2025, and its implications for India’s export competitiveness. The US implemented abaseline 10% tariff on all imports, alongside higher tariffs on specific trading partnerssuch as China, Canada, Mexico, Vietnam, and Thailand. While India’s average tariff These developments highlight the strategic importance of the US as India’s largestexport destination and a key growth corridor. India must pursue complementarypolicy measures to capitalise these advantages, including targeted export promotion,deeper integration into global value chains, and a services-focused trade agreement HIGHLIGHTS 1.In Q3 FY25, merchandise exports grew by 3% (to $108.7 bn) while imports roseby 6.5% (to $187.5 bn) widening the trade deficit to $78.7 bn. However, a servicessurplus of $52.3 bn, driven by 17% growth in services exports, partially offset thisgap. 2.Export composition remains stable; aircraft, spacecraft and parts entered the topten exports surging by over 200% year-on-year due to increased demand fromSaudi Arabia, UAE, and Czech Republic. 3.Despite the dominance of lower-tech exports, India’s export structure graduallyshifts toward medium-high and high-tech, indicating rising export sophistication. 4.India’s high-tech exports grew 10.6% CAGR to $80.6 billion in 2024, comprising18.3% of total merchandise exports. 6.India’s DDS exports more than doubled over the decade, reaching $269 billion in2024 and making the country the fifth-largest exporter globally. 7.In the DDS export composition for 2024, ‘Other Business Services’ led with a 53%share, followed by ‘Computer Services’ at 39%, aligning with global trends. 8.In the current US tariff regime, at the HS 2 level, India is expected to gaincompetitiveness in 22 of the top 30 product categories,covering 61% of itsexports to the U.S. and representing 68% of total US imports. 9.Similarly,at the HS 4 level, India enjoys a favorable tariff differential in 78 ofthe top 100 products