India’s Trade Stays Resilient in Q1 FY26 as Services Lead, Export Mix Shifts

India’s trade performance remained steady in the April–June quarter of FY26, supported by a strong surge in services exports and a visible shift in the composition of merchandise trade, even as global demand stayed uneven. According to NITI Aayog’s Trade Watch Quarterly (Q1 FY26), India’s total goods and services trade reached $439 billion, registering a 3.5% year-on-year growth.

Services Export Drive Stability 

Services continued to be the main pillar of India’s external sector. Services exports rose 10% year-on-year to $97 billion, while imports grew at a much slower pace to $49.5 billion, resulting in a robust services trade surplus of $48 billion. Digitally delivered services, such as IT, software, R&D, and creative services, remained the strongest contributors, showcasing India’s growing role in global knowledge-based trade.

Also read: Q3FY26 Preview: What To Expect From Oil & Gas Earnings?

Merchandise Exports Soften Amid Global Headwinds 

Merchandise exports declined 2.1% year-on-year to $112 billion, showing weak global goods demand and disruptions in specific sectors. Imports, meanwhile, increased by around 5% to $180 billion. It was driven largely by higher inflows of industrial inputs, electronics, machinery, and chemicals. The combined goods and services trade balance posted a net deficit of $21 billion during the quarter.

Structural Shift In Export Basket

Despite the headline dip in merchandise exports, the report highlights a structural transformation underway. Electronics exports surged 47% year-on-year, lifting their share to over 11% of total exports, while machinery exports grew 11.1%. In contrast, petroleum exports fell sharply, weighing on overall goods performance. This shows deeper integration into global value chains and a gradual move away from reliance on petroleum and labour-intensive exports.

FTAs and Import Trends

Trade with Free Trade Agreement (FTA) partners showed a widening deficit, as imports from FTA countries rose faster than exports. Imports from partners such as the UAE, Japan and Thailand increased sharply, reflecting India’s growing demand for energy products and intermediate goods. Exports to several ASEAN markets, however, remained under pressure.

Also read: Britannia, VBL, Marico Among Top FMCG Stocks Ahead Of Q3FY26 Results

Outlook

NITI Aayog noted that India’s Q1 FY26 trade data points to resilience amid volatility, with services strength and technology-led exports offsetting global uncertainties. Going ahead, deeper value-chain integration, competitiveness in high-tech manufacturing, and sustained services growth will be key to strengthening India’s external sector position.