In a year marked by the Donald Trump administration’s shifting tariffs and global geopolitical tensions, India’s trade performance faces several challenges. While the India-UK Free Trade Agreement has been successfully concluded, the government is negotiating a bilateral trade agreement with the US. In the meantime, it would be interesting to review and reflect on India’s trade performance in the financial year 2024-25 (FY25).
India’s total exports, comprising goods and services, increased to $820.93 billion in FY25. This marks a 6.5 per cent increase over FY24. Merchandise exports accounted for $437.42 billion (53 per cent), while services, powered by India’s global edge in IT, finance, and business solutions, contributed $383.51 billion (47 per cent). Imports, however, grew at a faster clip of 6.85 per cent, reaching $915.19 billion in FY25. Of total imports, merchandise made up the lion’s share (79 per cent) with $720.24 billion, while services added $194.95 billion (21 per cent). This pushed the trade deficit to $94.26 billion, up from $78.39 billion in FY24. With the IMF pegging India’s nominal GDP at $4.19 trillion in FY25, the trade-to-GDP ratio stands at a robust 41.4 per cent — this reflects a deeper link with global markets.
In the case of agriculture — a sector employing over 46 per cent of India’s workforce — agri-exports inched up to $52 billion in FY25 from $48.9 billion a year earlier, registering a modest 6.3 per cent increase. While this is a welcome trend, it’s still far off the $100-billion target set for 2030. Compare this with the performance between FY05 and FY14, when agri-exports grew by an average of 20 per cent annually, leaping from $8.7 billion to $43.3 billion. The last decade, in contrast, has been sluggish. From FY15 to FY25, average annual growth collapsed to just 2.3 per cent. As a result, India’s agri-trade surplus shrank from $27.7 billion in FY14 to just $13.8 billion in FY25.
Several factors explain this. Global price trends are one. When world agri-prices rise, Indian exports benefit. When they fall, we lose ground. But there’s more at play. Domestic trade policies, especially frequent export bans and curbs on essentials like rice, wheat, sugar, and onions, have repeatedly disrupted export momentum. These measures are often driven by inflation fears at home but end up affecting exports adversely.
Rice, India’s top agricultural export in FY25, is a case in point. The country exported 20.2 million metric tonnes (MMT), worth $12.5 billion, nearly a fourth of all agri-exports. Other key items exported include marine products ($7.4 billion), spices ($4.5 billion), buffalo meat ($4.1 billion), processed foods ($3.5 billion), tea and coffee ($2.7 billion), and sugar ($2.2 billion). The government’s rice export controls in 2022-23 offer useful lessons. As India restricted broken rice exports, slapped duties on parboiled rice, and introduced a minimum export price (MEP) for Basmati, global rice prices spiked. Although the volume of exports fell by 27 per cent — from 22.3 MMT in FY23 to 16.3 MMT in FY24 — the export value dropped by only 6 per cent. Once most restrictions on rice exports were lifted in late 2024 (except for broken rice), rice exports bounced back to 20.2 MMT, bringing in $12.5 billion in FY25. This points to a critical insight: India’s dominance in global rice trade — about one-third of the 61.4 MMT market in FY25 — gives it the power to influence global prices. But over-exporting depresses these prices, yielding lower marginal revenue. Our analysis of optimal export tax suggests that India should impose an export duty of about 10 to 15 per cent to ensure that marginal revenue from exports is not declining.
Another concern with rice exports is that much of India’s global competitiveness stems from heavy subsidies on water, electricity, and fertilisers used in its production. Growing rice is extremely water-intensive — growing a kilogram of rice requires 3,000 to 5,000 litres of water, depending on the topography. If we take an average of 4,000 litres per kg, and assume that half of it percolates back to groundwater, still exporting 20.2 MMT of rice effectively means exporting around 40 billion cubic metres of water. That’s a massive drain on our scarce water resources.
India’s agri-export strategy must focus on improving productivity across the board. This means greater investment in research and development, better seed technology, expanded irrigation, judicious use of fertilisers, and wider adoption of resource-efficient farming practices such as precision agriculture and fertigation — applying fertilisers through an irrigation system, typically drip or micro-irrigation. By doing so, India can lower its per-unit cost of production, enhance its global competitiveness, increase export earnings, boost farmer incomes, and promote environmental sustainability.
On the import front, India’s agri-imports rose by 16.5 per cent in FY25, from $32.8 billion in FY24 to $38.2 billion in FY25. Edible oils dominate the import basket, comprising $17.3 billion for 16.4 MMT, accounting for 45.4 per cent of total agri-imports. With 55–60 per cent of edible oil consumption met through imports — primarily palm oil, followed by soybean and sunflower — this dependence is excessive and unsustainable. India must pursue a targeted, pragmatic policy focused on domestic oil palm cultivation. Oil palm yields up to four tonnes of oil per hectare, 10 times more than mustard. However, it takes four to six years to mature, during which smallholders face income loss. Government support, equivalent to the opportunity cost of their land (that forgone income from crops), is essential during this gestation phase. Further, incentives should also promote higher oil recovery rates through improved processing. Considering socio-political sensitivities around land ownership, a regulated plantation model involving corporate leasing under oversight and collaboration with farmer producer organisations (FPO) could unlock private investment while safeguarding farmer interests.
India’s broader trade story is promising. Agriculture, however, presents both challenges and opportunities. A consistent and strategic approach to trade policy, combined with long-term investments in sustainable productivity, will be key to unlocking the sector’s full potential on the global stage.
Gulati is Distinguished Professor and Juneja is research fellow at ICRIER. Views are personal
