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NITI Aayog, in its latest Trade Watch Quarterly briefing, underscored India’s struggle to fully leverage export opportunities in key global markets despite improvements in trade performance.
The think tank noted that while India's total trade grew by 5.67% in the first half of FY25, the country remains an underperformer in major trade blocs such as the EU, North East Asia, North America, and ASEAN, which collectively account for 74% of global import demand. India caters to only 6% of this demand, suggesting significant untapped potential.
The report also flagged China’s continued dominance in global trade, particularly in textiles, where India is the sixth-largest exporter but holds less than 5% share in global textiles trade.
In fibre-based textiles—such as silk, wool, and cotton—India meets 10% of global demand ($6.7 billion out of $65.9 billion), but struggles in technical textiles, a segment dominated by China, Germany, and South Korea.
Supply Chain Shifts and Trade Policy
The briefing highlighted ongoing disruptions in global supply chains, with Western nations increasingly shifting trade to politically aligned partners. Senior economist and Niti Aayog Member Arvind Virmani pointed out, “This is a period of great churn in the world trading system. The partial decoupling between the US and China will have implications on global trade, including India.”
Also read: India should prioritise bilateral trade agreements, says NITI Aayog’s Ramesh Chand
He further noted that India must rise to the top among gainers in the "China Plus Five" strategy, which seeks to diversify supply chains beyond China. To capitalise on these shifts, India needs to strengthen its presence in large markets through bilateral trade agreements (BTAs) and free trade agreements (FTAs).
Need for Structural Reforms
The report also highlighted high electricity costs, low MMF (man-made fibre) consumption, and tariff barriers as challenges limiting India’s export competitiveness. India’s MMF consumption stands at just 3.1 kg per capita, compared to 12 kg in China and 22.5 kg in the US.
Additionally, India's real output per worker in manufacturing is at 10.7, significantly lower than China’s 19.8, reflecting lower productivity levels. The think tank recommended addressing cross-subsidisation in electricity pricing to reduce costs for industries.
Trade Agreements and Future Outlook
NITI Aayog emphasised the need to address non-tariff barriers through FTAs, particularly with the EU and UK. Virmani acknowledged the challenges in trade negotiations, stating, “Negotiations are not just about economics; they are also influenced by domestic politics. The UK’s FTA talks were delayed due to elections—something that may not happen in dictatorships.”
Looking ahead, NITI Aayog will present a detailed analysis of reciprocal tariffs' impact on India in the next Trade Watch Quarterly report. The briefing also noted that tariffs on China, Canada, and Mexico—the top three exporters to the US—could create opportunities for India to strengthen its trade position.
Also read: MSMEs vital to India’s growth; education and skilling key to $50 tn economy: NITI Aayog CEO
The report concluded that zero or low tariffs could help India integrate into competitive global supply chains and reduce dependence on a single country for value-added manufacturing. As Virmani summed up, “We can either keep worrying about what will happen or prepare for the scenarios that may unfold.”
The think tank noted that while India's total trade grew by 5.67% in the first half of FY25, the country remains an underperformer in major trade blocs such as the EU, North East Asia, North America, and ASEAN, which collectively account for 74% of global import demand. India caters to only 6% of this demand, suggesting significant untapped potential.
The report also flagged China’s continued dominance in global trade, particularly in textiles, where India is the sixth-largest exporter but holds less than 5% share in global textiles trade.
In fibre-based textiles—such as silk, wool, and cotton—India meets 10% of global demand ($6.7 billion out of $65.9 billion), but struggles in technical textiles, a segment dominated by China, Germany, and South Korea.
Supply Chain Shifts and Trade Policy
The briefing highlighted ongoing disruptions in global supply chains, with Western nations increasingly shifting trade to politically aligned partners. Senior economist and Niti Aayog Member Arvind Virmani pointed out, “This is a period of great churn in the world trading system. The partial decoupling between the US and China will have implications on global trade, including India.”
Also read: India should prioritise bilateral trade agreements, says NITI Aayog’s Ramesh Chand
He further noted that India must rise to the top among gainers in the "China Plus Five" strategy, which seeks to diversify supply chains beyond China. To capitalise on these shifts, India needs to strengthen its presence in large markets through bilateral trade agreements (BTAs) and free trade agreements (FTAs).
Need for Structural Reforms
The report also highlighted high electricity costs, low MMF (man-made fibre) consumption, and tariff barriers as challenges limiting India’s export competitiveness. India’s MMF consumption stands at just 3.1 kg per capita, compared to 12 kg in China and 22.5 kg in the US.
Additionally, India's real output per worker in manufacturing is at 10.7, significantly lower than China’s 19.8, reflecting lower productivity levels. The think tank recommended addressing cross-subsidisation in electricity pricing to reduce costs for industries.
Trade Agreements and Future Outlook
NITI Aayog emphasised the need to address non-tariff barriers through FTAs, particularly with the EU and UK. Virmani acknowledged the challenges in trade negotiations, stating, “Negotiations are not just about economics; they are also influenced by domestic politics. The UK’s FTA talks were delayed due to elections—something that may not happen in dictatorships.”
Looking ahead, NITI Aayog will present a detailed analysis of reciprocal tariffs' impact on India in the next Trade Watch Quarterly report. The briefing also noted that tariffs on China, Canada, and Mexico—the top three exporters to the US—could create opportunities for India to strengthen its trade position.
Also read: MSMEs vital to India’s growth; education and skilling key to $50 tn economy: NITI Aayog CEO
The report concluded that zero or low tariffs could help India integrate into competitive global supply chains and reduce dependence on a single country for value-added manufacturing. As Virmani summed up, “We can either keep worrying about what will happen or prepare for the scenarios that may unfold.”
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