Even as India has concluded more than 18 free trade agreements so far, the country must now concentrate on extracting real export gains from these deals rather than pursuing additional agreements, amid a difficult global trade environment expected in 2026, according to a report by the Global Trade Research Initiative (GTRI).
The think tank noted that India’s total exports stood at about USD 825 billion in FY25 and are projected to increase only modestly to nearly USD 850 billion in FY26. This subdued growth reflects weak global demand, rising protectionism and new trade barriers. Merchandise exports are likely to remain largely stagnant, while services exports—expected to cross USD 400 billion—will provide the main support to overall trade growth.
“With 18 FTAs already in place and more possibly on the horizon in 2026, India’s priority must shift from signing agreements to ensuring they translate into tangible export expansion,” the report said, highlighting sectors such as electronics, engineering and textiles as key focus areas.
GTRI warned that India is entering 2026 amid one of the toughest global trade phases in recent years. Slowing demand in major economies, increasing use of protectionist measures and the introduction of climate-linked trade restrictions are coinciding with India’s push to scale up exports, making the challenge more about defending market share than rapid expansion.
The United States remains a major pressure point. Under President Donald Trump, Washington has increasingly relied on unilateral tariffs, bypassing World Trade Organization norms. Between May and November 2025, India’s exports to the US reportedly declined by around 21 per cent under the prevailing 50 per cent tariff regime. GTRI cautioned that unless the US withdraws the additional 25 per cent penalty tariff linked to India’s purchases of Russian oil, or enters into a trade agreement with New Delhi, shipments to India’s largest export market could face further decline.
Europe presents a different set of challenges. The European Union is set to roll out its Carbon Border Adjustment Mechanism (CBAM) from January 1, 2026, which will impose carbon-linked costs on imports. Even ahead of its financial implementation, compliance and reporting requirements have already contributed to a nearly 24 per cent fall in India’s steel exports to the EU. From next year, EU importers are expected to factor CBAM-related costs into prices, with actual payments to be made through certificate surrender starting in 2027.
Despite these headwinds, the report pointed to some resilience in India’s export performance. While shipments to the US declined, exports to other global markets increased by about 5.5 per cent, indicating gradual diversification of destinations.
GTRI concluded that with limited control over global geopolitical and policy developments, India’s export strategy must focus on domestic reforms. Enhancing product quality, moving up the value chain and reducing production and logistics costs will be critical. “In 2026, India’s trade performance will be shaped less by external opportunities and more by the effectiveness of domestic execution,” the report said.
