India's Exports could Reach $900 Billion by 2023-2024

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ten data blog19-06-2023

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India's exports of goods and services are likely to reach $900 billion this fiscal year, up from $770 billion the previous year, as the country remains resilient despite global headwinds, a senior official of the exporters' organization said.

Ajay Sahai, director general of the Federation of Indian Export Organisations (FIEO), said merchandise exports could expand to $495 billion to $500 billion by the year ending March 2024, while services exports could reach $400 billion.

Overseas demand remains strong in many markets, he added.

The metals and minerals sector will account for the largest share of 35 percent of global exports at a compound annual growth rate (CAGR) of 7.5 percent, according to estimates in the Future of Trade 2030 report by Standard Chartered Bank and PricewaterhouseCoopers Singapore. Chemicals and pharmaceuticals will account for 13 percent of global exports at a CAGR of 5.9 percent, while the machinery and electrical industry will come in third, accounting for 11 percent of exports at a CAGR of 8.5 percent.

However, the betting on record numbers comes despite the fact that tightening global financial conditions and ongoing geopolitical woes remain a major obstacle, as reflected by weak manufacturing exports.

"India's exports are likely to be impacted by the ongoing slowdown in major trading partners, including developed economies, global financial sector pressures, high inflationary pressures leading to tighter global monetary and financial conditions, and the ongoing uncertainty surrounding the Russia-Ukraine conflict," the Export-Import Bank of India said in a statement.

Trade Minister Piyush Goyal urged exporters to explore new markets, given the possible impact of the war in Ukraine and the global economic slowdown.

"There are very, very tough days ahead," Goyal said at an industry event late Wednesday, while warning of the consequences of the conflict.

Prime Minister Narendra Modi's government has set an export target of $2 trillion by 2030, offering concessions to boost exports of electronics, engineering, pharmaceuticals and other goods.

India's exports have increased by more than $200 billion in the past two years, led by a surge in exports of software and mobile devices, as well as agricultural and petroleum products.

However, exports of engineering, gems and jewelry commodities have slowed in the past few months.

Exports of agricultural products, petroleum and electronics remained strong in Western markets due to price factors, while exports to Asian and Middle Eastern countries grew sharply, exporters said.

"The main engine behind export growth is the services sector, which has been growing at a historically high rate of about 30 percent," Commerce Minister Sunil Barthwal said last month. "We are optimistic that this growth momentum will continue despite strong global headwinds."

Commerce and Industry Minister Piyush Goyal was recently outspoken about the record exports of goods and services. He said total exports for the current fiscal will exceed $750 billion and that India is expanding rupee trade with several countries, many of which are in the advanced stages of dialogue and finalization.

India's major sectoral exports include:

  • Engineered Products: $7.8 billion in exports. This is mainly due to the various trade agreements India has entered into with other countries benefiting the sector. Currently, all Indian multinational companies manufacturing pumps, tools, carbides, air compressors, engines and generators are trading at historically high prices and the possibility of shifting production to India has increased. It is expected to continue its upward trend in steel, auto parts and medical equipment, as well as in India to drive Make in India.

  • Petroleum products: Petroleum products have made a significant contribution to the growth of Indian exports. They registered a growth of $6.1 billion. Factors contributing to the growth were higher crude oil prices, which were exacerbated by the post-pandemic world, soaring oil demand and recent geopolitical tensions.

  • Gems and Jewelry: Gems and jewelry accounted for $3.6 billion of India's exports. The sector is one of the key areas of India's exports and is expected to flourish even more with the reduction of import duties on cut and polished diamonds and the extension of the Emergency Credit Line Guarantee Scheme (ECLGS) which accounts for 90% of MSME. India's largest gem and jewelry exports go to the United States of America (USA), the United Arab Emirates (UAE), followed by the United Kingdom (UK), Germany, Singapore, the Netherlands, etc.

  • Agricultural exports: During the pandemic, agricultural exports were encouraged by the government's efforts to meet global food demand. India exported $700 million worth of rice, the highest among agricultural products. The growth in exports of agricultural and processed food products is mainly due to various initiatives taken by the government through the Agricultural and Processed Food Products Export Development Authority (APEDA) such as organizing B2B exhibitions in different countries, product specific and general marketing activities through active participation of Indian embassies.

  • Organic and inorganic chemicals: Organic and inorganic chemicals registered exports of $2.3 billion due to strong demand from developed markets, further contributing to the growth of Indian exports. The growth in exports of organic and inorganic chemicals was driven by a surge in shipments of organic and inorganic chemicals, agrochemicals, dyes, dye intermediates, and specialty chemicals. China is the leading importer of dyes, dye intermediates and organic chemicals from India. The United States remains the largest importer of essential oils and inorganic chemicals, while Brazil is the largest importer of agrochemicals from India.

  • Electronics: Electronics also contributed significantly to India's export surge. Exports of electronics amounted to $1.9 billion. The sector has benefited from several PLI programs such as the Large Scale Electronics Manufacturing Program and the Program for Promotion of Electronics Components and Semiconductor Manufacturing (SPECS). According to the Union Budget Economic Survey 2019-20, integrating "Assembling for the World in India" into "Make in India" could increase India's export market share to around 3.5% by 2025 and 6% by 2030 Textile and Apparel

  • Textiles and apparel: India is one of the world's leading apparel manufacturers, with textile exports reaching $1 billion in September 2022. The government has launched various programs such as the Integrated Textile Parks Program (SITP), Technology Upgradation Fund Scheme (TUFS) and the Mega Integrated Textile Region and Apparel (MITRA) Park Program. In addition, Amazon India has also signed a Memorandum of Understanding with Manipur Handloom & Handicrafts Development Corporation Limited (MHHDCL). UN Climate Change's Sustainable Textiles for Sustainable Development (SusTex) program will increase the participation of artisans in Asia, especially in India, over the next decade.

  • Pharmaceuticals: With $2.1 billion in pharmaceutical exports, India is the world's largest supplier of generic drugs. China currently accounts for 20% of global supply and contributes about 60% of the world's vaccines. The US, UK and Russia are among India's largest importers, accounting for 29%, 3% and 2.4% respectively during 2021-22. The Strengthening the Pharmaceutical Industry (SPI) program focuses on strengthening the existing infrastructure with a total financial outlay of $60 million (Rs. 5 billion).

  • Seafood: In September 2022, India's seafood exports amounted to US$ 700 million, of which India exported 1,369,264 metric tons of seafood. Frozen shrimp continues to be the major export product in terms of volume and value, with total exports of frozen shrimp reaching 728,123 MT in 2021-22. The United States is the largest market for frozen shrimp imports, followed by China, the European Union, Southeast Asia, Japan and the Middle East.

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