India’s Import-Export Trends in FY 2020-21

Posted by Written by Atishay Bhatia Reading Time: 8 minutes

We look at India’s import-export trends in FY 2020-21, including top trading partners and factors enabling the country’s renewed trade growth prospects.

Since India opened its markets starting 1990-91, there has been an exponential rise in the country’s foreign trade exposure – exports have increased more than 16 times and imports more than 19 times. In FY 2020-21, India’s imports and exports stood at US$394.43 billion and US$291.80 billion, respectively.

While the global trade slump sprung by the COVID-19 pandemic is expected to outlast the global crisis following 2008-09, India’s foreign trade statistics offers scope for optimism. Foreign trade saw a dip of 6.8 percent for India – a better performance than the forecasted 9.2 percent decline in global trade by the World Trade Organisation (WTO) in October 2020.

Despite the subsequent economic downturn during the pandemic, foreign trade for FY 2020-21 saw expansionary trends developing in certain sectors and destinations owing to unique market demand and supply chain disruptions. In this article, India Briefing breaks down major trends in India’s foreign trade in FY 2020-21.

India’s import-export environment

India top export items - 2020-21India top import items 2020-21

The uncertain global trade situation caused by the pandemic severely hit global merchandise trade in 2020, and India was not immune to the impact. Exports in FY 2020-21 amounted to a total of US$291.8 billion, declining 6.8 percent.

Among the top exported items – mineral fuels (oil) and gems and precious metals were the two most exported items, for a combined share of 18 percent.

2021 also predictably witnessed a surge in the performance of the pharmaceutical industry, whose production accounted for the third most exported category of items for the financial year. Since last year, India’s pharmaceutical industry has benefited from new investment flows, partnerships in vaccine production and biotechnology, and manufacturing incentive (Production-Linked Incentives or PLI) schemes besides growth in organic demand. 

Imports during FY 2020-21, on the other hand, saw a decline of more than 16 percent, amounting to US$394 billion. Mineral fuels and precious stones and metals remained the top imported items, with an increased demand for animal/vegetable fats and oils.

It is worth noting that raw materials and intermediates account for a considerable proportion of India’s exports, while finished products have an overwhelming presence in India’s imports basket.

Despite its promising growth, exports alone may not be sufficient to drive growth in the long run if they continue to be dominated by raw materials and intermediates. It lies in India’s interest to develop and diversify its manufacturing capacity to utilize its own abundant raw material and move up the value chain to meet domestic as well as foreign demand.

India’s top trade partners

india's top export markets 2020-21India's top import destinations 2020-21

Exports to USA continued to dominate with a share of over 17 percent of India’s total exports. This was followed by China and the UAE, swapping positions, as exports to the UAE dropped significantly in 2020-21.

For imports in FY2020-21, India’s top three destinations were China, USA, and UAE, with imports from Switzerland rising to fourth top sourcing destination. Switzerland accounts for a significant proportion of India’s precious metal imports, led by gold. 

Region wise distribution for Indian exports in 2020-21


Looking at the region wise share of exports, the data indicates a steady growth in exports from 15.31 percent in 2014-15 to 19.77 percent in 2020-21 to North America, countered by a decline in Asia’s share of 48.52 percent in 2014-15 to 46.52 percent in 2020-21.

The past few years have seen a steady decline in Asia’s share in India’s export basket accompanied by an increase in trade with countries in the west. This is likely because India is pulling away from trade partnerships in the east and looking to establish new trade relations in relatively under-tapped markets in western countries.

The Indian government withdrew from the Asia-Pacific Regional Comprehensive Economic Partnership (RCEP) in November 2019 due to the assessment that Indian exports were not flourishing to the region despite reduced non-tariff barriers (NTB) as ASEAN nations and India offer similar labor-intensive products in their export basket.

There has also been a shift in the approach towards global trade as India looks to build up trade exposure with western countries, a somewhat interesting development following geopolitical events like the US-China trade war, recent Australia-China trade tensions, and Brexit. Free trade agreement (FTA) negotiations are currently ongoing or planned to start in 2021 with the UK, European Union (EU), USA, Australia, and UAE. Both, the EU and UK are keen to re-establish their credentials as strong trade partners to India – eyeing its large consumption market and growing disposable incomes besides wanting to expand sourcing destinations.

India’s foreign trade policy

Once again postponed from October 2021 to March 2022, the next Foreign Trade Policy (FTP) (following FTP 2015-20) wants to grow India’s annual good and services exports to over US$1 trillion by FY 2026-27.

The new FTP is much awaited as it will offer government-supported strategies to cash in on the expected rebound in global economic growth.

Key objectives will include ensuring India’s greater integration with the global supply chain and reducing logistics costs.

Incentive schemes

The government remains supportive of incentive schemes. However, it has been working to revamp existing export schemes so they are in sync with WTO stipulations.

The Service Exports from India Scheme (SEIS) is expected to be revamped with a wider coverage of businesses, offering exporters duty credit scrips at five to seven percent of the net foreign exchange earned.

For merchandise exporters, Remission of Duties and Taxes on Exported Products (RoDTEP) is expected to be a part of the new FTP, which offers reimbursement of central, state, and local taxes/duties. It replaces the previous Merchandise Export from India Scheme (MEIS), which was not compliant with WTO rules.

Currently, negotiations are underway to expand the beneficiaries of RoDTEP. This is because there has been much disappointment among industry and trade stakeholders (and are key to the country’s export base) who have been left out of the remit of the new RoDTEP scheme, such as pharmaceutical, steel, and chemical industries; export-oriented units (including bio-technology parks and electronic hardware technology parks); Special Economic Zones (SEZ); free trade warehousing zones and custom bonded warehouses operating under the Manufacturing and Other Operations in Warehousing Regulations etc.

Another trade promotional scheme is the Export Promotion Capital Goods (EPCG), which facilitates the import of capital goods for manufacturing to augment the competitiveness of India’s exports.

Focus on new bilateral trade pacts

Following its withdrawal from the RCEP, India is actively working to forge new trade partnerships with other countries.

India has launched negotiations with the UAE, aiming to conclude trade talks and sign a mutually beneficial Comprehensive Economic Partnership Agreement (CEPA) by March 2022. The CEPA deal aims to improve bilateral economic relations, expand existing trade and investment relations, and could be a stepping-stone to expanding India’s trade ties with the UAE’s neighboring Gulf countries – presently dominated by energy items.

Progress is also being made around an India-EU free trade agreement as negotiations resumed after an eight-year halt. Political convergence on key regional and global issues provide background support as formal talks on two key pacts on investment protection and geographical indications began in September.

Meanwhile, India-UK talks are set to enter a new stage in November, with hopes to reach an Interim Agreement by March 2022, followed by a Comprehensive Agreement.

While it seems that foreign trade is on path to recovery, COVID-19 has certainly affected the ambitions of countries worldwide. The pandemic necessitated national spending to boost exports and foreign trade, but that has stretch government budgets thin, including India’s.

Even prior to the pandemic, India faced massive capital requirements to improve infrastructure, R&D, logistics, etc. to establish a competitive advantage over Asian and global rivals. Consequently, it has liberalized market access and since last year, launched sector-specific incentive (PLI) programs to develop industrial ecosystems around key product segments.

India manufacturing hubs

India’s government has its priorities well laid out and plans to work consistently on removing long-standing obstacles to boost jobs creation, trade growth in services and merchandise, and privatization through investment facilitation.

Future focus: Expanding trade flows, diversifying trade items

Experts predicted foreign trade to bounce back in FY 2021-22. Now in Q3 FY 2021-22, recovery is afoot with exports growing to US$33.1 billion in August, 45 percent higher than this period last year. Since the beginning of the current financial year, exports have amounted to an estimated US$163 billion. The target for exports for the current financial year is set at US$400 billion, and one India is set to achieve.

According to India’s Minister for Commerce and Industry, Piyush Goyal, last year [India’s] services export was US$194 billion, and goods was US$290 billion. He said, as reported in the Economic Times, “We would like both services and goods exports to compete with each other and together reach the US$2 trillion mark”. He also said the export target for the textiles sector was US$44 billion. Goyal also brought attention to the fact that India is trying to diversify its trade portfolio; cotton and cotton-based textiles dominate Indian exports, but work is underway to shift to man-made fiber and technical textiles, which now dominate international textiles trade. In a related development, India recently unveiled its production-linked incentive scheme for these segments in the textiles sector. This illustrates the government’s broad thinking and linkages between manufacturing aspirations and trade opportunities.

Meanwhile, to gauge India’s recent positive trade performance despite the pandemic, it must be noted that a major proportion of the increase in exports is attributed to shipments of petrol and diesel. Official data showed the export of petroleum products was up by 139 percent in August to US$4.6 billion – driven by a spike in global prices, compared to an increase in non-oil exports by 36.6 percent to US$28.6 billion.

Another factor is the economic rebound experienced by major economies from the beginning of 2021. US-India trade in goods showed an increase of 40 percent in June this year and is expected to surpass pre-COVID-19 pandemic highs. The Chinese economy also put behind the downturn in 2020, growing 18.3 percent in the first quarter of 2021, though slowing down in the second quarter.

With that in mind, it is important to consider the economic health of the entire network of world trade when evaluating the prospect of any single nation. The steady rebound of economies worldwide can be interpreted as a strong sign but breakdowns in multilateral relations, geopolitical rivalries, or supply chain blockages due to COVID shutdowns, logistics barriers, and steep shipping and container costs indicate some more pain is in store in the near term for international trade.

Nevertheless, these challenges and threats, particularly those borne out of the pandemic and trade rivalries, are set to propel India to retain its focus on upgrading its trade profile and pursuing trade agreements more freely, albeit increasingly on its own terms.


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