NITI Aayog’s Trade Watch (Q2 FY 2025–26): Analysing Trade and Electronics Dynamics
SDG 8: Decent Work and Economic Growth | SDG 9: Industry, Innovation and Infrastructure | SDG 17: Partnerships for the Goals
NITI Aayog | Ministry of Commerce and Industry | Ministry of Electronics and Information Technology (MeitY)
The NITI Aayog “Trade Watch Quarterly” for July-September FY 2025-26 mentions that India’s total trade grew by 5.1% year-on-year, reaching $895.1 billion, with electronics emerging as the second-largest export sector. Merchandise exports grew by 8.4%, significantly led by electrical machinery (33.4%), cereals (19%), and vehicles (18.5%), while services continued to outperform goods with a USD 50.9 billion surplus.
A thematic deep dive into the USD 4.6 trillion global electronics market reveals that while India has achieved a dominant position in mobile phone assembly (52.5% of the export basket), its overall global share remains at approximately 1%. The report identifies critical challenges, including a 10–18% structural cost disadvantage compared to East Asian competitors and a persistent dependency on imports for high-value components like semiconductors, displays, and battery systems. To mitigate these disadvantages, the report recommends Tariff Rationalization to reduce inverted duty structures that currently increase production costs for domestic manufacturers.
Key Pillars of India’s Trade and Electronics Transformation
Dynamic Export Composition: Shifting the export basket toward high-growth segments like smartphones, electrical machinery, and automobiles.
Semiconductor and Component Mission: Utilizing the ₹76,000 crore India Semiconductor Mission (ISM) and the ₹22,919 crore Electronics Component Manufacturing Scheme (ECMS) to develop domestic fabrication and R&D capabilities.
Strategic Free Trade Expansion: Leveraging the India-EU FTA (January 2026), which provides duty-free access for 99% of exports, and aiming to double trade with the UAE to $200 billion by 2032.
E-Commerce Export Channel: Projecting e-commerce exports to grow from $5 billion to $200–300 billion by 2030, potentially representing 20-30% of total merchandise exports.
South–South Linkage Growth: Capitalizing on the structural shift in global trade where exports to developing countries have increased fourfold to USD 244 billion.
What is “Tariff Rationalization” in the Electronics Sector? Tariff rationalization refers to the strategic adjustment of import duties on intermediate components to reduce the “inverted duty structure” that currently penalizes domestic manufacturers. In the electronics sector, high tariffs on critical parts like semiconductors and PCBs increase the overall production cost, contributing to India’s 10–18% cost disadvantage. Rationalizing these tariffs—meaning lowering duties on inputs while maintaining them on finished goods—is essential for making Indian-assembled products competitive in the global market and incentivizing global value chains to move more high-value manufacturing to India.
Policy Relevance: The India Perspective
Significance: The Q2 FY26 data represents a transition from exporting commodities to “Technology-Intensive Value Addition”, positioning India as a resilient node in global electronics supply chains.
Strategic Impact:
Bridging the Assembly-to-Value Gap: The high growth in electrical machinery (33.4%) provides the MeitY with a clear roadmap to move beyond final-assembly into high-value component manufacturing.
Reducing External Imbalances: The USD 50.9 billion services surplus is a critical cushion that allows the government to maintain stability even as it invests heavily in component-import-heavy sectors.
Unlocking E-Commerce Potentials: Projecting $300 billion in e-commerce exports by 2030 requires a rapid update to digital logistics and “Export Financing” mechanisms to support small-scale exporters.
Mitigating Geopolitical Risks: The duty-free access to the EU market following the 2026 FTA is a strategic hedge against bilateral trade volatility and a major opportunity for the “Make in India” initiative.
Follow the full report here: NITI Aayog Trade Watch Quarterly (July–September, Q2 FY 2025–26)