NITI Aayog has released its "Trade Watch Quarterly" for Oct-Dec (Q3) FY 2025-26, highlighting that India’s total merchandise and services trade reached $1.37 trillion, a 5.3% year-on-year growth.
While global goods trade grew by 8%, India's services surplus expanded by 12.8%, helping to offset the merchandise trade deficit. Exports grew at 5.4%, driven primarily by smartphones, engineering goods, and vehicles, while imports were dominated by mineral fuels and gold.
A critical trend noted is the rising share of trade with FTA partners, which reached 28.8% in 2024 compared to just 4.6% in 2006.
The report uses the Herfindahl-Hirschman Index (HHI) to show that while India's export concentration is declining, imports remain heavily concentrated. This means India is diversifying what it sells to the world, but remains dependent on a few sources for critical imports like mineral fuels and electronics.
The thematic focus on the Gems and Jewellery sector highlights its massive scale, contributing 7% to India's GDP and employing 5 million people, but warns of a declining global market share, which fell from 6.1% in 2015 to 2.9% in 2024. To combat this, the sector is shifting toward Lab-Grown Diamonds (LGDs), producing over 3 million units in 2023, representing 15% of global output.
Key Trade and Sectoral Findings
Trade Growth: Total exports and imports grew by 5.4% and 5.2% respectively between April and December 2025.
Export Composition: Growth was led by electrical machinery (smartphones) and mineral fuels, while imports were dominated by gold and capital goods.
Market Concentration: The HHI indicates successful export diversification, but persistent concentration in imports for mineral fuels and electronics.
Gems & Jewellery Value: Exports (excluding raw gold) stood at $29.5 billion, representing a 7.8% global market share.
Regional Hubs: Surat remains the world’s largest diamond hub, while Jaipur leads in coloured gemstones and Mumbai in jewellery manufacturing.
Lab-Grown Diamonds: Supported by R&D grants and duty-free input imports, India now holds a 15% share of global LGD production.
Geopolitical Risks: Tensions in the Gulf (which handles 12% of India's total trade) have increased energy prices and impacted trade costs.
What is the "Herfindahl-Hirschman Index (HHI)" in Trade?
The Herfindahl-Hirschman Index (HHI) is a mathematical measure used to determine the level of concentration or diversification in a trade portfolio. In the context of the NITI Aayog report, a declining HHI for exports means that India is successfully selling a wider variety of products to more countries, rather than relying on just one or two items.
However, the report warns that India's import HHI remains high, especially for mineral fuels and electronics, meaning the country is still heavily dependent on a few specific sources for its critical needs.
Policy Relevance
Mitigates Trade Deficit: The 12.8% growth in the services surplus is critical for maintaining India's balance of payments and stabilising the Rupee.
Informs FTA Strategy: The rise in trade with FTA partners to 28.8% validates the government's push for new agreements (like the upcoming GCC FTA) to diversify beyond traditional US/EU markets.
Guides Industrial Upgrading: The decline in global gems and jewellery share necessitates a shift from volume-based work (polishing) to value-led growth through branding and design.
Directs MSME Support: Since the jewellery sector is fragmented and MSME-driven, the recommendation for better access to finance and modernised clusters is vital for regional job security.
Energy Security Alert: The 12% trade reliance on the Gulf region underscores the need for strategic energy reserves and diversified shipping routes amid West Asian tensions.
Follow The Full News Here: NITI Aayog Trade Watch Quarterly Q3 FY 2025-26