The Reserve Bank of India's (RBI) annual report for 2024–25 presents a nuanced picture of India's external trade landscape:

Key Takeaways:

Challenges:

Geopolitical Tensions & Protectionism:

Global instability and a resurgence of protectionist policies are hindering India's export prospects.

There's a looming threat of a global tariff war, which could reduce demand for Indian goods abroad.

Rising Input Costs & Weak Domestic Demand:

Manufacturing faces cost pressures, which may reduce competitiveness.

Subdued domestic consumption further complicates overall economic momentum.

Widening Trade Deficit:

Particularly driven by high oil import bills, putting pressure on the current account.

Global Trade Contraction:

World merchandise trade volume is expected to shrink by 0.2% in 2025, suggesting a tougher external environment for exporters.

Opportunities & Relief:

Trade Agreements:

India has engaged in 14 Free Trade Agreements (FTAs) and 6 Preferential Trade Agreements (PTAs), which can soften the blow of global headwinds.

These include existing pacts with partners like ASEAN, UAE, and Australia.

Ongoing Negotiations:

Talks with the US, EU, Oman, and Peru signal potential market expansion and diversification.

New deals could reduce tariff barriers and open up new export avenues.

Positive Signals Globally:

The US-UK trade deal and US-China trade dialogue hint at easing global trade frictions, which could create a more stable trade environment globally.

Outlook:

While India's exports are under stress due to external and internal factors, strategic trade diplomacy and targeted policy support may help maintain momentum. However, addressing supply-side bottlenecks, reducing energy import dependence, and boosting domestic demand will be crucial to sustaining growth in a challenging global environment.