The assessment, released during India’s eighth Trade Policy Review, presents a broadly positive picture of economic performance while underlining the scale of reforms required to sustain rapid growth for another two decades. India will need annual real gross domestic product growth of about 8% to reach high-income status by the centenary of independence.
Average annual growth stood at 7.3% between 2022-23 and 2025-26 following the rebasing of national accounts. The economy is projected to expand by about 6.3% during 2026 and contribute roughly 17% of global real GDP growth, reflecting its growing importance to the world economy.
Domestic consumption, public infrastructure spending and capital formation have driven the post-pandemic expansion. Government expenditure on physical infrastructure has risen to around 3.2% of GDP, helping attract private investment, improve connectivity and raise productive capacity.
Services remain the dominant engine of growth, accounting for 53.6% of GDP during the first half of 2025-26. The sector supports about 30% of total employment and more than 60% of urban jobs, while telecommunications, computer and information services form the largest export category.
India’s services trade surplus reached 4.8% of GDP in 2024-25, partly offsetting a goods trade deficit equivalent to 7.3% of GDP. Remittances also provided a substantial buffer against the merchandise imbalance and helped strengthen the external account.
The trade-to-GDP ratio peaked at 50% in 2022-23 before easing to 45% in 2024-25, remaining above pre-pandemic levels. India’s participation in global value chains has increased but continues to trail the average recorded by the Association of Southeast Asian Nations, limiting the country’s ability to capture a larger share of manufacturing investment shifting across Asia.
Manufacturing has remained broadly stable at between 17% and 18% of GDP despite production-linked incentives, tax concessions and targeted support for sectors including electronics, pharmaceuticals, automobiles and renewable energy. Export competitiveness is also constrained by logistics expenses, uneven infrastructure, fragmented production networks and lengthy regulatory processes.
The WTO review identified a gradual movement from traditional, lower-value exports towards more technology-intensive manufacturing. Petroleum products, minerals, metals and chemicals still account for the largest shares of merchandise trade, followed by electrical equipment, transport products, machinery and information technology equipment.
India’s export concentration is comparable with that of many developed economies, but its overall share of global merchandise exports remains modest relative to the size of its economy. Expanding that share will require deeper links with international production networks, more predictable regulation and easier access to imported components and technology.
The government has improved customs systems through digitisation, risk-based inspection, round-the-clock operations at major ports and electronic documentation. India has achieved an implementation score of about 80% in an international survey of digital and sustainable trade facilitation, placing it above regional averages.
Financial inclusion has also advanced through digital payments, bank-account expansion and technology-based public infrastructure. These changes have reduced transaction costs for businesses and households while supporting the formalisation of economic activity.
However, businesses continue to face varying requirements across states, overlapping regulations and frequent changes in tariffs and import rules. Product standards, licensing procedures and domestic-content policies can add uncertainty for overseas suppliers and manufacturers dependent on cross-border supply chains.
New Delhi has defended several measures as necessary to promote industrial development, strengthen economic resilience and protect vulnerable sectors. It has also pointed to non-tariff barriers imposed by trading partners, including environmental rules, technical standards and food-safety requirements that can restrict access for exporters.
The tension reflects the central challenge facing the government’s trade strategy: balancing self-reliance with the greater openness needed to raise productivity, attract investment and expand exports. Protective measures can support emerging industries, but prolonged insulation may reduce competitive pressure and increase costs for downstream producers.
Free trade agreements have therefore become an increasingly important part of the export strategy. India has pursued deals with major markets to secure preferential access for textiles, engineering goods, pharmaceuticals, processed food, services and other sectors while seeking safeguards for agriculture and smaller businesses.
The agreements could help exporters compete more effectively against rivals from Vietnam, Bangladesh and other economies that already enjoy preferential market access. Their benefits will depend on whether domestic companies can meet overseas quality standards, increase production scale and reduce delivery times.
(IPA Service)
