FIEO Predicts Exports to Recover and Reach $1 Trillion in FY26
India’s Export Aspirations: Aiming for $1 Trillion by FY26
According to the Federation of Indian Export Organisations (FIEO), India’s exports are set to reach an impressive $1 trillion in the fiscal year 2025-26. This growth is primarily driven by significant advancements in sectors such as electronics, engineering, pharmaceuticals, and favorable trade agreements with the UK, European Union (EU), and European Free Trade Association (EFTA). Nevertheless, new regulations from the EU, particularly the Digital Product Passport, may present compliance hurdles for Micro, Small, and Medium Enterprises (MSMEs).
Electronics Exports on the Rise
This fiscal year, electronics exports are anticipated to surge to $60 billion, up from $44 billion projected for 2024-25, as detailed by Reuters. Overall, India’s export figures are expected to reflect an increase, reaching $1 trillion, largely due to buyers’ efforts to diversify sourcing in light of new global tariffs. The FIEO indicates this growth translates to a remarkable 21.2% increase compared to last year’s exports that totaled $824.9 billion. For the fiscal year 2025-26, merchandise exports are projected to grow by 12%, reaching between $525 billion and $535 billion, while services exports are forecasted to rise by 20% to between $465 billion and $475 billion, as noted by FIEO President S.C. Ralhan.
Sector-Wise Growth Projections
If these forecasts are accurate, it would mark a significant comeback for goods exports that witnessed over a 3% decline in FY24 and stagnant growth in FY25. On the other hand, service exports have remained relatively resilient, increasing their share in India’s total exports. Various key sectors, including electronics, engineering, chemicals, textiles and clothing, pharmaceuticals, and agriculture, are all predicted to experience considerable growth compared to the previous year. The petroleum and gems and jewellery sectors are also expected to show positive trends in the upcoming year.
Drivers of Electronics Export Growth
A crucial contributor to this trend will be the establishment of electronics manufacturing units under the Production Linked Incentive (PLI) scheme, which is set to start production this year. Additionally, international buyers, particularly from the United States, are increasingly looking beyond China for their sourcing needs. Notably, Apple has announced plans to shift the assembly of all iPhones intended for the U.S. market to India. In the previous fiscal year, Apple sourced products valued at Rs 1.5 lakh crore from India. This trend is not limited to Apple; many multinational companies are pivoting toward India, and trade diversions from China are expected to generate an additional $5 billion in opportunities, according to FIEO Director General and CEO Ajay Sahai.
Impact of Trade Agreements
The forthcoming Bilateral Trade Agreement (BTA), along with Free Trade Agreements (FTAs) with the UK, EFTA, and the EU, will further bolster these efforts. The interim trade agreement that exempts India from reciprocal tariffs is anticipated to provide a competitive edge, Sahai emphasized. On the gems and jewellery front, exports are expected to rise to between $32 billion and $25 billion, a slight increase from last year’s $29.8 billion, despite recent contractions due to reduced demand and challenges in sourcing natural diamonds. Similarly, petroleum exports—which fell by 25% to $63.3 billion in FY25—are projected to rebound and surpass $70 billion. Agricultural exports are also expected to rise to $55 billion, up from $48.5 billion, while chemicals are estimated to contribute $40-45 billion, textiles and clothing $23-25 billion, and pharmaceuticals $30 billion.
Challenges on the Horizon
Despite a positive outlook, exports may face some challenges arising from technical and non-tariff barriers. One significant hurdle includes the implementation of the Digital Product Passport (DPP) set to commence on January 1, 2026. This regulation will require a wide array of products, starting with sectors like electronics, batteries, textiles, and construction materials, to comply with strict documentation regarding their entire life cycle—from raw materials to manufacturing, usage, recycling, and disposal. Such compliance requirements could impose additional burdens on Indian exporters, especially MSMEs. Failure to meet DPP standards may result in rejected shipments or a diminished competitive position within the EU market, which is increasingly prioritizing sustainability.
Conclusion
The DPP regulation, alongside the EU’s impending carbon tax, deforestation policies, and Eco Design Sustainable Product Regulation, all set to take effect on January 1, 2026, signals a tightening landscape for exporters. As trade talks progress, a U.S. delegation is expected to visit India soon, underscoring the urgency for Indian exporters to adapt to these evolving regulations to sustain their growth trajectory.
