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1Trade Watch July-Sept (Q2) FY 2025-26
QUARTERLY
TRADE WATCH
THEMATIC ANALYSIS:
ELECTRONICS TRADE
July-Sept (Q2 FY 2025-26) TRADE WATCH QUARTERLY, Quarterly Report for the FY 2025-26
Copyright@ NITI Aayog, 2026
Published: February, 2026
NITI Aayog
Government of India
Sansad Marg, New Delhi-110001, India July-Sept (Q2 FY 2025-26)
TRADE WATCH
QUARTERLY

Dr Pravakar Sahoo
Program Director, E&F I
NITI Aayog
Government of India

Acknowledgement
Global trade is unfolding in a more contested and uncertain environment. Intensifying geopolitical
competition, a more complex security landscape, and emerging financial vulnerabilities linked to
leveraged technology investments are reshaping the global outlook. Trade policy is increasingly
driven by security and political considerations rather than efficiency or multilateral rules. Taken
together, these shifts point to a global economy that is becoming more cautious and strategically
aligned.
This edition of Trade Watch Quarterly reviews India’s trade performance in Q2 FY26 and presents
a thematic assessment of electronics trade, which represents a $4.6 trillion global market. Though
India’s share has increased in global electronics trade in recent years, particularly in mobile phones
and telecom equipment, it still accounts for a small share. Global electronics trade remains large
and highly competitive, with demand concentrated in circuits, telecom equipment, mobile phones,
and data processing machines. Production networks in this sector are becoming increasingly value-
chain driven, with greater specialization across stages of design, assembly, and manufacturing.
Additionally, global trade patterns are witnessing a marked expansion in South–South trade.
Between 2005 and 2024, exports from developing economies to other developing economies
expanded from around USD1.8 trillion to USD 7.3 trillion, a four-fold increase, while developing-
to-developed economy exports rose from USD 2.1 trillion to USD 4.7 trillion. This shift presents
a significant opportunity for India to diversify markets and strengthen trade linkages across the
Global South.
The analyses presented in this edition aim to inform policy pathways by providing a
comprehensive overview of trade trends, sectoral shifts, and trade balances, while situating India’s
trade performance within the evolving global context. I take this opportunity to thank Shri B.V.R.
Subrahmanyam, CEO of NITI Aayog, for his continued guidance and support, and the advisory
board members for their valuable input. As always, I commend the Economic & Finance-I team at
NITI for their dedicated efforts in producing this edition of the Trade Watch Quarterly.
New Delhi
February’2026
Dr. Pravakar Sahoo
iTrade WatcJB July-Sept (Q2) FY 2025-26
ADVISORY BOARD
S. No.Board MemberAffiliation
1 Harsha Vardhana Singh Former Deputy Director, WTO
2 Santosh Kumar Sarangi
Former Additional Secretary & Director
General, DGFT
3 Pravin KrishnaProfessor, Johns Hopkins University
4 Rupa ChandaDirector, UNESCAP
5 Deepak MishraDirector and Chief Executive, ICRIER
6 Rakesh Mohan Joshi Professor and Vice Chancellor, IIFT, Delhi
7 Arpita Mukherjee Professor, ICRIER
8 James J. Nedumpara
Professor and Head, Centre for Trade and
Investment Law (CTIL)
9 Pritam Banerjee
Professor and Head, Centre for WTO
Studies
10 C VeeramaniDirector, Centre for Development Studies
11 Sanjay KathuriaVisiting Senior Fellow, CSEP
12 Biswajit NagProfessor, IIFT
13 Debashis Chakraborty Professor, IIFT, Kolkata
14 Pranjul BhandariChief India Economist, HSBC iiTrade WatcJB July-Sept (Q2) FY 2025-26
EXECUTIVE SUMMARY
Global trade growth moderated in mid-2025 but remained positive, with services
outpacing goods, driven largely by higher prices and stronger performance in
developing regions such as East Asia and Africa.
1
Against this backdrop, India’s total
merchandise and services trade grew by 5.1% year-on-year during April–September
2025, reaching $895.1 bn. Exports rose faster than imports, supported by robust
growth in services and select merchandise categories.
India’s merchandise exports were led by electrical machinery, mineral fuels, cereals,
automobiles, and precious stones, with smartphones, non-basmati rice, and
passenger vehicles emerging as key growth drivers. Imports remained dominated
by mineral fuels, electronics, precious stones, and fertilisers, the latter surging due to
favourable monsoon conditions. In terms of direction, India recorded strong export
growth to markets such as Hong Kong, China, the UAE, and the US, while ASEAN
showed some moderation. A major structural shift highlighted is the deepening of
trade among developing economies between 2005 and 2024, which now accounts
for a rising share of global exports. India’s trade trajectory aligns with this broader
Global South rebalancing, supported by regional value chains, rising intra-Asia trade,
and new trade corridors. At the same time, e-commerce has emerged as a critical
enabler of future export growth. India is now among the world’s top six e-commerce
markets, with strong momentum in electronics-led online trade. While e-commerce
exports are currently small, they are projected to scale rapidly and could contribute
up to a quarter of India’s merchandise exports by 2030, provided regulatory, logistics,
and MSME-related constraints are addressed.
The thematic focus on electronics underscores a decade-long transformation.
Electronics has become India’s second-largest export sector, driven overwhelmingly
by mobile phones, where India has developed a strong comparative advantage
through assembly-led manufacturing and policy support. However, India remains
heavily import-dependent for components such as semiconductors, integrated
circuits, batteries, and displays, which dominate global electronics demand.
Comparative analysis shows that while India is competitive in mobile phones and
telecom equipment and power-electronics segments, it remains marginal in high-
value, technology-intensive components that anchor global value chains.
Global electronics trade is highly concentrated in East Asia, with China, Taiwan,
South Korea, and Vietnam deeply embedded in component-intensive production
networks. India, by contrast, is positioned primarily as a final-market supplier,
exporting finished electronics largely to consumption markets such as the US and
UAE, rather than participating in dense intra-Asian processing trade. As a result,
India lacks scale, value addition, technological learning, and spillovers associated
with integration.
Domestic electronics manufacturing has expanded rapidly but remains highly
concentrated in mobile phones, with gradual diversification into industrial
electronics, components, automotive electronics, and consumer devices. India’s tariff
structure is more protective than peers like China and Vietnam, supporting domestic
assembly but it raises costs for component-intensive production and weakens
1 https://unctad.org/system/files/official-document/ditcinf2025d10_en.pdf iiiTrade WatcJB July-Sept (Q2) FY 2025-26
India’s integration into global supply chains. Recent policy initiatives, including the
Electronics Component Manufacturing Scheme, semiconductor mission, customs
duty rationalisation, and support for e-commerce exports, signal a strategic push to
move India up the electronics value chain.
India’s electronics strategy must transition from assembly-led gains to component-
led manufacturing. On the supply side, incentives need to be aligned toward
domestic value addition, sustained R&D, and ecosystem deepening supported by
anchor investments that transfer technology, improve standards, and generate
stable demand for local suppliers. On cost competitiveness, coordinated fiscal,
trade, and logistics reforms are essential to close persistent structural cost gaps.
On the demand side, while recent FTAs improve external market access, greater
emphasis is required on predictable domestic procurement, export finance, and
regulatory simplification to attract investments especially in a turbulent geopolitical
environment. These measures can anchor India’s transition from a manufacturing
base to a globally competitive electronics ecosystem and support the $500 bn
manufacturing ambition by FY2030.
Overall, the analysis points to a dual reality that while India has made strong gains
in trade and electronics assembly, sustaining long-term competitiveness will hinge
on much deeper integration into global value chains. This transition requires moving
beyond labour-intensive assembly toward higher value-added activities such as
PCB design, semiconductor assembly and testing, power electronics, alongside
improvements in logistics efficiency and regulatory simplification. ivTrade WatcJB July-Sept (Q2) FY 2025-26
HIGHLIGHTS
1. In Q2 FY’26, exports drove trade growth, with merchandise and services exports
both rising by about 8.5% y-o-y, outpacing import growth.
2. In Q2 FY26 trade saw strong momentum, with exports led by a 33.4% surge in
electrical machinery, while fertiliser imports stood out with a 239% y-o-y jump.
3. In Q2 FY26, trade destinations remained broadly stable, with exports to top
markets growing strongly led by Hong Kong, China and the US, while imports
from the UAE surged 48% y-o-y.
4. South–South trade has outpaced South–North trade, with exports among
developing economies rising from about $1.8 trillion in 2005 to $7.3 trillion in
2024, exceeding their exports to developed economies.
5. Cross-border e-commerce will be emerging as a key driver of India’s export
growth, supporting the push toward higher merchandise exports by 2030, with
electronics likely to play a central role.
6. The electronics segment represents a $4.6 trillion (tn) global market. India’s share
in this market stands at around 1% for 2024.
7. India’s export growth between 2015 and 2024 is concentrated in segments like
telecom and mobile phones, while segments such as chips and semiconductors
show minimal gains.
8. India’s electronics exports are concentrated in mobile phones, which make up
52.5% of the basket, while power equipment and wires contribute smaller shares.
Imports are dominated by integrated circuits (23.7%), mobile phones (17.5%), and
data-processing machines (10.6%).
9. India’s electronics exports are largely directed to the USA, UAE, and Netherlands,
with mobile phones driving most of this trade. Key markets for high-tech
components like integrated circuits and semiconductors remain dominated by
China, Hong Kong, and Taiwan.
10. India must strengthen electronics export performance by addressing structural
cost disadvantages, expanding targeted export financing, improving logistics
efficiency, and boosting domestic manufacturing of strategic components.
11. India should enhance market access and integration into global value chains
through proactive trade facilitation, government procurement support,
leveraging strategic FTAs and anchor investments, MSME participation, and
higher domestic value addition. viTrade WatcJB July-Sept (Q2) FY 2025-26
Contents
A. India’s Trade Analysis��2
1. Merchandise and Services Analysis��2
2. Compositional Analysis��3
3. Trade Direction��5
4. Regional Analysis��7
5. Deepening Trade Among Developing Economies�� 8
6. Merchandise Trade with FTA Partners��8
7. The Growing Role of E-Commerce in Exports��10
B. Thematic Analysis: Overview��16
1. Mapping the Global Electronics Trade Profile��17
2. Mapping India’s Trade Profile��19
3. Composition of India’s Electronics Exports Over Time (2015–24) ��21
4. Mapping Global Demand and India’s Export Footprint in Key Electronics
Segments��22
5. Assessing Domestic Performance of the Electronics Industry��26
6. Comparative Tariff Structure: India, China and Vietnam��27
7. Foreign Investment Trends in the Electronics Industry��29
8. Manufacturing and Technology Enablers for India’s Integration in Electronics��32
9. Recent Developments in India’s Trade Policies: Key Updates for
the Electronics Sector��34
10. Industry Insights on Strengthening India’s Electronics Trade Performance��36
11. Way Forward��38
C. Policy Highlights��42
1. Global Trade–Related Policy Updates��42
2. India’s Trade Policy Developments��42
3. Commodity Price Trends��42 1Trade WatcJB July-Sept (Q2) FY 2025-26
A.
INDIA’S TRADE
ANALYSIS 2Trade Watch July-Sept (Q2) FY 2025-26
A. India’s Trade Analysis
Global goods and services trade growth between July-September slowed but
remained positive with services trade growth outpacing that of goods and expanding
by 4% and 2% respectively as compared to the previous quarter. The increase in
value was driven by higher prices. The increase was supported by stronger trade
performance in developing countries with robust performance particularly in East
Asia and Africa
2
.
India’s merchandise and services trade performance recorded a 5.1% y-o-y increase
between April-September 2025, supported by strong export growth in merchandise
and services exports. During this period, total trade reached $895.1 bn. Exports
witnessed a growth of 5.8% and imports 4.4% y-o-y, with exports reaching $418.6 bn
and imports at $476.5 bn between April–September 2025. (Fig 1)
Fig 1: Total Trade performance between Apr-Sept’25
5.1%
5.8%
4.4%
0%
2%
4%
6%
8%
0
200
400
600
800
1000
Total Trade Export Import
$Billion
Apr -Sep 2024 Apr-Sep 2025 Change % (RHS)
Source: Department of Commerce, MoC&I, GOI
1. Merchandise and Services Analysis
In September 2025, merchandise exports recorded a strong increase of 6.1%, reaching
$36.1 bn, and imports also witnessed a strong surge of 17.6%, reaching $69.1 bn (Fig
2). India’s total trade (merchandise and services) in Q2 FY26 grew by 6.4% y-o-y, with
services trade growth of 7% and merchandise trade of 6%. In Q2 FY26, merchandise
exports increased by 8.4% y-o-y to $108 bn, and imports rose by 5% reaching $196 bn
(Fig 3). This resulted in a net merchandise deficit of $87.9 bn for the quarter.
Fig 2: Merchandise Trade (Monthly) Fig 3: Merchandise Trade (Quarterly)
6.1%
17.6%
0%
4%
8%
12%
16%
20%
0
20
40
60
80
Sept (EX) Sept (IM)
$Billion
FY 2025 FY 2026 y-o-y % (RHS)

8.4%
4.9%
0%
2%
4%
6%
8%
10%
-
50
100
150
200
250
Q2 (EX) Q2 (IM)
$Billion
FY 2025 FY 2026 y-o-y % (RHS)
Source: Department of Commerce, MoC&I, GOI
2 https://unctad.org/system/files/official-document/ditcinf2025d10_en.pdf 3Trade Watch July-Sept (Q2) FY 2025-26
India’s services exports for September’25 stood at $37 bn, registering a strong y-o-y
growth of 12.6%, while services imports increased by 8.1% reaching ~$18 bn (Fig 4).
During Q2 FY26, services exports witnessed a robust annual expansion of 8.7%,
reaching $102 bn and services imports rose marginally by 3.9% reaching $51 bn
during the same period, resulting in a net services trade surplus of $50.9 bn (Fig 5).
The combined balance of trade in goods and services registered a net deficit of $37
bn for this quarter.
Fig 4: Services Trade (Monthly) Fig 5: Services Trade (Quarterly)
12.6%
8.1%
0%
3%
6%
9%
12%
15%
-
5
10
15
20
25
30
35
40
Sept (EX) Sept (IM)
$Billion
FY 2025 FY 2026 y-o-y % (RHS)

8.7%
3.9%
0%
2%
4%
6%
8%
10%
-
20
40
60
80
100
120
Q2 (EX) Q2 (IM)
$Billion
FY 2025 FY 2026 y-o-y % (RHS)
Source: Department of Commerce, MoC&I, GOI
2. Compositional Analysis
2.1 Merchandise Exports
In Q2 FY26, the leading
3
exports amounted to $68.2 bn marking a y-o-y increase of
13%. The leading commodities continued to be mineral fuels (12.7% share), electrical
machinery and equipment (10.5%), and nuclear reactors (8.7%). For Q2 FY26 y-o-y
growth was recorded for all the top ten commodities with electrical machinery, cereals
and vehicles recording strong y-o-y growth of 33.4%, 19% and 18.5% respectively (Fig
6). The top commodities remained the same as the previous quarter.
Exports of electrical machinery recorded a sharp increase, supported by the sustained
expansion in smartphone shipments. Cereals exports strengthened following the
resumption of non-basmati rice exports after the withdrawal of all export restrictions.
In parallel, merchandise exports from the automobile sector improved, reflecting
higher outbound shipments of passenger vehicles
4
.
Under natural, cultured pearls and precious stones, exports recorded strong growth
of 12.7%, driven by higher demand for loose cut and polished diamonds (HS 710239)
and jewellery or articles made from precious metals such as platinum or palladium
(HS 711319).
3 Leading commodities are the top ten commodities with the highest value share in exports.
4 Notable increases for these particular goods have been recorded for electrical machinery, cereals and vehicles: HS
851713, HS 100630 and HS 870322 4Trade Watch July-Sept (Q2) FY 2025-26
Fig 6: Composition and Growth of Exports
12.7%(2.6%)
10.5%(33.4%)
8.7%(10.7%)
7.0%(12.7%)
6.3%(18.5%)
5.8%(7.8%)
4.7%(6.8%)
2.6%(19.0%)
2.5%(9.3%)
2.3%(10.8%)
0% 2% 4% 6% 8% 10% 12% 14% 16%
Mineral & related fuels
Electrical machinery & parts
Nuclear reactors, boilers & parts thereof
Natural, cultured pearls & precious stones
Vehicles other than railways & parts
Pharmaceutical products
Organic chemicals
Cereals
Articles of iron or steel
Iron and steel
Note: Y-o-y growth of the commodity in India’s export for this quarter is mentioned in parenthesis
Source: Department of Commerce, MoC&I, GOI
2.2 Merchandise Imports
In Q2 FY26, the leading
5
imports amounted to $153.6 bn marking a y-o-y increase
of 4.6%. The imports continue to be led by mineral fuels (25.4% share), natural and
cultured pearls (13.9%), electrical machinery (13.5%), and nuclear reactors (9.5%).
Among the top ten import categories, fertilisers replaced plastics and articles as
compared to the previous quarter (Fig 7).
In growth terms, fertilisers registered a sharp y-o-y increase of 239%, rising from $1.5
bn to $5.1 bn, driven by favourable monsoon conditions and strengthening domestic
demand. This expansion was largely attributable to higher imports of DAP and urea.
Imports of animal and vegetable oils and fats also increased by 24% y-o-y, reflecting
higher inflows of crude palm oil and soybean oil. Electrical machinery recorded
a 14% increase, led by rising imports of processors and controllers, smartphone
components, and electronic integrated circuits.
By contrast, five product categories within the top ten imports for the quarter registered
contractions. The steepest decline was observed in optical and medical instruments
and parts, which fell by 8.7%, while the mildest contraction was recorded in mineral
fuels and oils, at 0.9% due to a decline in demand for liquified natural gas (LNG).
5 Leading commodities are the top ten commodities with the highest value share in imports. 5Trade Watch July-Sept (Q2) FY 2025-26
Fig 7: Composition and Growth of Imports
25.4%(-0.9%)
13.9%(-5.4%)
13.5%(14.2%)
9.5%(8.9%)
3.3%(-7.7%)
3.0%(-3.2%)
2.9%(24%)
2.6%(238.7%)
2.3%(-8.7%)
2.0%(9.1%)
0% 5% 10% 15% 20% 25% 30%
35%
Mineral & related fuels
Natural, cultured pearls & precious stones
Electrical machinery & parts
Nuclear reactors, boilers & parts thereof
Organic chemicals
Plastic & articles thereof
Animal & veg oil and fats
Fertilisers
Optical/ Medical/Surgical Instruments &
parts
Iron and steel
Note: y-o-y growth of the commodity in India’s imports for this quarter is mentioned in parentheses
Source: Department of Commerce, MoC&I, GOI
3. Trade Direction
3.1 Merchandise Exports
India’s exports to its top markets
6
contributed around 52.5% of total exports in Q2
FY26, amounting to ~$55.1 bn, witnessed a sharp y-o-y increase of 9.5%. Hong Kong
entered the top ten export destinations during the quarter replacing Australia in the
previous quarter.
Among the top ten export destinations, India recorded positive y-o-y growth across
eight markets, with the strongest growth observed in Hong Kong, although total
exports to the destination remain modest at $2.2 bn (Fig. 8). Export growth to Hong
Kong was driven by higher shipments under HS 71, particularly diamonds, articles of
silver jewellery, and precious stones.
Other destinations posting strong growth include China, where exports expanded by
27.7%, supported by increased shipments of light oils and their preparations, shrimps,
light-emitting diodes, and non-alloyed aluminum. Exports to the UAE also surged,
reflecting rising demand for smartphones, mineral fuels, and articles of jewellery.
Contractions were limited to two destinations within the top ten. Exports to Singapore
and the Netherlands declined by 18% and 7.5%, respectively. The decline in exports to
the Netherlands was primarily driven by a sharp fall in smartphone shipments and
mineral fuels, while exports to Singapore weakened mainly due to lesser shipments
of mineral fuels.
6 Top markets are those that account for the top 10 shares of total exports in Q2 FY26. 6Trade Watch July-Sept (Q2) FY 2025-26
Fig 8: India’s exports to major destinations
-40%
-20%
0%
20%
40%
60%
0
4
8
12
16
20
24
$Billion
Q2 FY25 Q2 FY26 % Y-o-Y Growth Q2 (RHS) % share in India's exports Q2'FY26 (RHS)
Source: Department of Commerce, MoC&I, GOI
3.2 Merchandise Imports
India’s share of imports from its top
7
markets continued to contribute around 60%
of total imports in Q2 FY26 and amounted to ~$104 bn. China, UAE and Russia
continued to remain the top countries importing from India with UAE recording
a sharp import growth of 48% and Russia a decline of about 7.8%. Decline in y-o-y
growth was recorded with five economies with the sharpest in Singapore of 25.7%
and the least with the US of 4% (Fig 9).
Fig 9: India’s imports from major destinations
-40%
-20%
0%
20%
40%
60%
0
5
10
15
20
25
30
35
$Billion
Q2 FY25 Q2 FY26 % Y-o-Y Growth Q2 (RHS) % share in India's imports Q2'FY26 (RHS)
Source: Department of Commerce, MoC&I, GOI
Rising imports from the UAE were primarily driven by higher shipments of petroleum
products, copper wires, and unworked diamonds. Imports from China increased on
the back of higher inflows of lithium-ion batteries and other electronic components
under HS 85. By contrast, imports from Singapore declined, largely reflecting a
contraction in coal shipments.
7 Top markets are those that account for the top 10 shares of total imports in Q2 FY26. 7Trade WatcJB July-Sept (Q2) FY 2025-26
4. Regional Analysis
4.1 Merchandise Exports
India’s exports to its top 10 export regions, accounting for a significant 89% of its total
exports in Q2 FY26, show a y-o-y increase of 7.7%. The top three regions recorded
positive growth with North America, accounting for approximately a quarter of total
exports during this quarter, recording a y-o-y growth of around 6.3%. EU countries,
another major export destination, experienced a y-o-y growth of ~4.6%. ASEAN was
the only major region which recorded a decline of 3.2% (Fig 10).
Fig 10: Region-Wise Export Composition and Growth
21.1%(6.3%)
17.1%
(4.6%)
13.3%(14.8%)
9.1%(17.8%)
8.1%(-3.3%)
5.9%(10.0%)
4.3%(-1.3%)
4.2%(17.7%)
3.1%(25.2%)
2.4%(19.6%)
0% 5% 10% 15% 20% 25%
North America
EU Countries
West Asia- GCC
NE Asia
ASEAN
South Asia
Other European
Countries
Latin America
West Africa
East Africa
Note: y-o-y growth of the commodity in India’s exports for this quarter is mentioned in parentheses
Source: Department of Commerce, MoC&I, GOI
4.2 Merchandise Imports
India’s Q2 FY26 imports registered an overall growth of 4.7% from the top ten regions,
reaching $195 bn this quarter, these regions collectively account for 92% of India’s
imports during the quarter. Six out of ten regions continue to experience positive
y-o-y growth. India’s imports mainly came from North East (NE) Asia, West Asia
(GCC), and ASEAN, accounting for ~55% of total imports during the quarter (Fig 11).
Strong growth was observed in West Africa, with imports rising from $2.6 bn to $5.5 bn
during the quarter, driven by a sharp increase in shipments from Ghana and Nigeria.
At the commodity level, the expansion was led by higher imports of crude oil, natural
gas, and unwrought forms of stones and diamonds. Latin America also recorded
robust growth of around 34%, supported by increased imports of unwrought forms,
soybean oil, and copper ores. By contrast, imports from North America contracted by
3.5%, while those from EFTA declined by 16.0%. The contraction in EFTA was primarily
attributable to reduced imports of unwrought forms, coal, and soybean oil. 8Trade Watch July-Sept (Q2) FY 2025-26
Fig 11: Region-Wise Import Composition and Growth
27.2%(5.5%)
15.8%(6.3%)
11.5%(4.4%)
8.9%(15.7%)
7.5%(-5.2%)
6.9%(-3.5%)
4.2%(34.1%)
3.7%(-16.1%)
3.5%(-2%)
2.8%(106.6%)
0%10%20%30%
NE Asia
West Asia- GCC
ASEAN
EU Countries
Other CIS Countries
North America
Latin America
European Free Trade Association (EFTA)
Other West Asia
West Africa
Note: y-o-y growth of the commodity in India’s imports for this quarter is mentioned in parentheses
Source: Department of Commerce, MoC&I, GOI
5. Deepening Trade Among Developing Economies
Between 2005 and 2024, exports among developing economies have emerged as
a faster-growing pillar of global exports, than exports of developing to developed
economies. The exports among developing economies expanded from about $1.8
trillion to $7.3 trillion, a four-fold increase, while exports of developing to developed
economies rose from $2.1 trillion to $4.7 trillion, or a little over double. India’s exports
to developing countries during this period has increased fourfold from $56 bn to
$244 bn, although its share remains at 2% in 2024.
Fig 12: Merchandise Export Growth (2005=100) Fig 13: Developing-Country Exports Share by Region
0
100
200
300
400
500
2005 2010 2015 2020 2024
World Exports
Developing to Developing Economies Exports
Developing to Developed Economies Exports
India to Developing Economies Exports

46%
53%
43%
60%
38%
52%
0%
10%
20%
30%
40%
50%
60%
70%
Developing DevelopedAsia
2005 2024
1.87.3 2.14.7 0.10.5
Note: Volume in trillion dollars
Source: ITC Trade Map
Between 2005 and 2024, export expansion shifted towards developing economies.
The share of exports among developing economies rose from 46% to 60%, while the
share of exports of developing economies to developed economies’ fell from 53%
to 38%. Asia emerged as one of the central drivers of this rebalancing with exports
nearly quadrupling over the period and its share in exports of developing economies
rose from 43% to 52%. As a result, exports among developing economies now make
up a larger and growing share of their total exports, highlighting that growth 9Trade WatcJB July-Sept (Q2) FY 2025-26
opportunities are increasingly driven by demand within the developing world rather
than reliance on advanced economies alone. This surge reflects the deepening of
regional value chains and industrial integration in the Global South, especially in
Asia, where intermediate and manufactured goods now constitute a large share of
trade and intra-regional linkages account for more than half of total exports from
the region.
8

Additionally, rising incomes and a growing middle class across developing nations
have boosted demand for higher-value goods from peers, while regional trade
agreements like the African Continental Free Trade Area, , and the India-Middle
East-Europe Economic Corridor, have also lowered trade costs and strengthened
economic ties within the Global South.
9
6. Merchandise Trade with FTA Partners
India’s exports with its Free Trade Agreement (FTA) partner countries in Q2 FY26
amounted to $38 bn with y-o-y of 7% and total imports from FTA partners increased
by 5% y-o-y, reaching $69.8 bn, resulting in a trade deficit of $31 bn.
In India’s export shipments to FTA countries the contraction was led by ASEAN
(-16.8%), alongside sharp declines in Singapore (-36.7%), Malaysia (-32.1%), Australia
(-18.7%), and Mauritius (-51.8%). Offsetting these declines, exports recorded growth to
UAE (10.5%), South Korea (14.7%), Thailand (16.1%), Sri Lanka (17.6%), and Japan (7.5%)
(Fig 14).
Fig 14: Exports- FTA Partners
-60%
-40%
-20%
0%
20%
40%
0
2
4
6
8
10
12
$Billion
Q2 FY25 Q2 FY26 y-o-y change in Q2'FY26 (RHS)
Source: Department of Commerce, MoC&I, GOI
Imports from FTA partners increased from $66.8 bn to $69.8 bn, driven by higher
inflows from ASEAN (4.4%), SAFTA (82.2%), Singapore (6.7%), Malaysia (16.2%), Japan
(13.0%), and Thailand (13.3%). Imports declined from Australia (-27.5%) and South
Korea (-2.6%). Overall, India’s FTAs remain resilient, with strong export gains in key
markets and rising imports signaling deeper trade integration.
8 https://unctad.org/system/files/official-document/ditcinf2025d11_en.pdf
9 https://www.sc.com/en/news/corporate-investment-banking/reshaping-global-trade-the-rise-of-south-south-corri-
dors/ 10Trade Watch July-Sept (Q2) FY 2025-26
Fig 15: Imports- FTA Partners
-40%
-20%
0%
20%
40%
60%
80%
0
5
10
15
20
25
$Billion
Q2 FY25Q2 FY26% YoY Q2 Growth (RHS)
Source: Department of Commerce, MoC&I, GOI
7. The Growing Role of E-Commerce in Exports
Building on earlier Trade Watch Quarterly analyses of digitally delivered services and
creative economy exports, this section examines e-commerce as the goods-trade
analogue of digital delivery. E-Commerce has become an important trade channel
by lowering transaction and distribution costs and enabling firms, especially
smaller sellers, to access domestic and cross-border markets at scale. Its market size
increasingly reflects how deeply an economy is integrated into digital trade. The
global e-commerce landscape is highly concentrated across a few large economies.
China is the single largest e-commerce market globally, with an estimated market
size of ~$3.0 tn, accounting for about 39% of the global market. The United States
ranks second, with a market size of ~$1.16 trillion, representing around 20% of global
market value. Together, China and the United States account for nearly 60% of global
e-commerce market size. Other major markets include the United Kingdom (~$196
bn), Japan (~$193 bn), and South Korea (~$147 bn), each contributing a 4–6% share of
global market size
10
.
India currently ranks among the top six e-commerce markets globally. The market
size increased from $14 bn in 2014 to ~$120 bn in 2024, accounting for around 4%
of global e-commerce market value. As per ITA, India is expected to emerge as the
fastest-growing retail e-commerce market among 20 countries during 2023–2027,
with a CAGR of 14.1%.
11
In 2024, smartphones constituted the largest segment of India’s e-commerce market
at $39 bn, followed by fashion and apparel ($29 bn) and electronics and appliances
($27 bn), highlighting the dominance of consumer durables and lifestyle categories
(Fig 16). The sector’s growth has been supported by rising smartphone penetration,
an expanding internet user base, and increasing competition among domestic and
global platforms. Additionally, the rapid expansion of the direct-to-consumer (D2C)
10 https://www.doofinder.com/en/statistics/ecommerce-market-size-by-country
11 https://www.trade.gov/ecommerce-sales-size-forecast 11Trade WatcJB July-Sept (Q2) FY 2025-26
segment, supported by significant investor interest, signals a structural shift in how
Indian firms access digital retail channels.
Electronics related segments smartphones, electronics and appliances, together
accounting for approximately $65 bn, or about half of total e-commerce market,
making electronics the single largest segment of India’s online retail market.
Electronics e-commerce presents an opportunity to leverage scale, productivity
gains, formal employment, and closer linkages with India’s growing electronics
manufacturing ecosystem. Supporting e-commerce, particularly electronics-
oriented exports, can therefore contribute to export diversification, job creation, and
broader economic growth as India progresses towards the goal of Viksit Bharat by
2047.
Fig 16: E-commerce market size India 2024, by segment
39
29
27
19
9.60
8.30
6.40
0 10 20 30 40 50
Smartphones
Fashion apparel & accessories
Electronics and appliances
Food & FMCG
Others
Furniture and home décor
Beauty and personal care
$Billion
Source: Statista
E-Commerce Exports from India
India’s e-commerce exports, though currently at an early stage, are poised for a sharp
expansion over the coming decade. In FY2023, e-commerce exports were valued at
around $4–5 bn, contributing roughly 0.9–1.1% of India’s total merchandise exports
and about 0.11–0.14% of GDP. With growing global demand for Indian products, wider
adoption of digital platforms, improved logistics, and supportive policy measures,
e-commerce exports are projected to rise significantly. As India targets $1 tn in
merchandise exports by 2030 under the Viksit Bharat vision, e-commerce exports
are projected to scale rapidly to US$200–300 bn
12
. This expansion could raise their
share in India’s total exports to 20–30% and their contribution to GDP to 2.9–4.3%,
underscoring the potential of e-commerce to emerge as a key pillar of India’s export
strategy and broader economic growth. Given India’s 500 mn-strong labour force and
63 mn MSMEs contributing ~29% of GDP and 43% of exports, e-commerce exports
hold the potential to unlock new growth opportunities. This transition is especially
significant for MSMEs, which have already enabled lakhs of small producers to access
global markets through digital platforms.
12 https://www.ey.com/content/dam/ey-unified-site/ey-com/en-in/newsroom/2024/07/ey-enabling-e-commerce-exports-
from-india.pdf 12Trade WatcJB July-Sept (Q2) FY 2025-26
Challenges and Constraints in India’s E-Commerce Export Ecosystem
13,14
●Complex Regulatory and Compliance Framework: Multiple approvals for
customs, GST, and foreign exchange, along with the absence of a unified digital
single window, increase compliance burden and costs for MSMEs.
●
Absence of dedicated customs codes for e-commerce exports: India does not
yet have separate customs supervision or declaration codes for e-commerce
shipments, unlike countries such as China, resulting in documentation-heavy
processes, delays in clearance, and inadequate differentiation between B2B and
low-value e-commerce exports.
●
Inefficient reverse logistics and duty treatment of returns: The lack of a clear,
streamlined framework for handling cross-border e-commerce returns leads to
re-imported goods often being treated as fresh imports and subjected to duties,
increasing costs, delaying refunds, and discouraging MSMEs from scaling global
e-commerce operations.
●Lack of Coordinated Ecosystem Support: Unlike traditional exporters,
e-commerce exporters receive limited support for upgrading warehousing,
marketing, or technology infrastructure.
●Absence of International Cooperation Framework: Absence of e-commerce-
specific bilateral arrangements limits market access, logistics collaboration, and
regulatory harmonization.
●Low Awareness and Institutional Support: Many MSMEs lack awareness,
training, and institutional support for cross-border e-commerce, restricting their
global competitiveness.
Global best practices show countries that have streamlined e-commerce trade
such as China have introduced 24-hour digital customs clearance, dedicated cross-
border pilot zones with tax incentives, and distinct supervision codes (9610 & 1210) to
simplify compliance, while also enabling platform-led logistics and a single-window
duty-free returns system
15
and South Korea supports MSMEs through relaxed export
declaration thresholds, consolidated packaging, and its Export e-Room model,
reducing procedural burdens
16
. The United States complements this with institutional
backing via its E-Commerce Solutions Centre and SBA/USCS networks, offering
training, financing, and market linkages
17
. Together, these measures highlight how
targeted customs reforms, logistics integration, and SME support can reduce costs,
expedite delivery, and expand global reach.
The Government of India has taken targeted steps to intensify e-commerce export
support for MSMEs by extending major export incentive schemes including Duty
Drawback, RoDTEP and RoSCTL benefits to postal e-commerce shipments effective
January 15, 2026, thereby levelling the playing field and enhancing competitiveness
13 https://www.ey.com/content/dam/ey-unified-site/ey-com/en-in/newsroom/2024/07/ey-enabling-e-commerce-exports-
from-india.pdf
14 https://gtri.co.in/gtriRep8.pdf
15 https://www.ey.com/content/dam/ey-unified-site/ey-com/en-in/newsroom/2024/07/ey-enabling-e-commerce-exports-
from-india.pdf
16 https://cm.asiae.co.kr/en/article/2025082817242193685
17 https://www.trade.gov/welcome-ecommerce-solutions-center 13Trade WatcJB July-Sept (Q2) FY 2025-26
for small sellers across smaller towns and remote regions
18
. Additionally, the launch of
E-Commerce Export Hubs (ECEHs) aims to provide integrated facilities for logistics,
customs clearance, packaging, quality certification and warehousing, thereby
reducing cost, time and regulatory friction for cross-border digital trade
19
.
To build on these measures, advancing cross-border e-commerce requires
coordinated policy and regulatory reforms to reduce trade frictions. Priorities
include simplifying and harmonising customs procedures for low-value shipments,
ensuring predictable and transparent tariff regimes, and strengthening regionally
coordinated e-commerce logistics, supported by platform-led consumer protection
mechanisms. Further progress will depend on deeper digital integration of trade
and logistics systems, streamlined frameworks for returns and re-imports, and
enhanced export-readiness support for MSMEs to deliver sustained gains in cross-
border participation and export performance.
18 https://www.pib.gov.in/PressReleasePage.aspx?PRID=2215141
19 https://www.ibef.org/news/e-commerce-export-hubs-to-support-indian-smes-with-cost-effective-logis-
tics-and-streamlined-regulatory-processes 14Trade Watch July-Sept (Q2) FY 2025-26 15Trade WatcJB July-Sept (Q2) FY 2025-26
B.
THEMATIC ANALYSIS:
ELECTRONICS TRADE 16Trade WatcJB July-Sept (Q2) FY 2025-26
B. Thematic Analysis: Overview
Over the past decade, India’s electronics industry has emerged as a critical driver of
manufacturing growth. The value of electronics production increased nearly six-fold
from ₹1.9 lakh crore in 2014–15 to ₹11.3 lakh crore in 2024–25.
20
The sector accounts
for 3.4% of GDP and has created nearly 25 lakh jobs in the past decade.
21
In 2023-24,
RBI estimated that India’s electronics production accounts for 3% of the global total,
with this share increasingly growing over the years.
22
On the trade front, there has been an exponential growth at 17.2% CAGR between
2015-24 as opposed to the global growth of 4.4%. In 2015, electronics
23
exports were
at $8.6 bn at 3.01% of India’s total exports and has now become the second largest
export sector valued at $42 bn, accounting for 10% of the export basket for India in
2024.
24
The sector has generated significant employment both directly and indirectly.
Government data indicate that electronics manufacturing and related value chains
have created over 2,50,000 indirect and 1,20,000 direct jobs of which 70% are held
by women between the age of 19–24 years.
25
The flagship PLI scheme has accounted
for the bulk of job creation in the past decade with its backward linkages with
investors of the scheme. India’s leading segment, mobile phones for which it stands
as the second-largest manufacturer in the world is also a labour-intensive process of
assembling. Indian firms have also expanded their presence across newer segments
of the mobile phone value chain with proven abilities in designing.
The global electronics industry is a massive and geographically concentrated
market, valued at over $4.3 tn
26
, with production dominated by a handful of countries
like China, Taiwan, USA, South Korea, Vietnam ($143.3 bn) and Malaysia ($121.4 bn).
Vietnam and Malaysia have emerged as important nodes in global value chains
(GVCs), with electronics exports that are significantly larger than India’s, underscoring
their deeper integration into export-oriented manufacturing networks. In contrast,
India’s share of global electronics exports remains at around 1% despite rapid recent
growth. China’s entrenched dominance, together with mature players like South
Korea and Japan specialising in high-value components (such as semiconductors
and displays), highlights the intensity of the competitive landscape India faces.
Indian policymakers have responded with sustained and evolving support to
integrate the country into global electronics production and trade. The National
Policy on Electronics and the broader Make in India initiative have been followed
by successive measures, such as the PLI schemes for large-scale electronics and
IT hardware, which have played a central role. These incentives reduce production
costs, attract investment, and encourage firms to localise production, contributing to
rapid expansion of manufacturing units and exports. The government has expanded
support to input segments via the Electronics Components Manufacturing Scheme
20 https://www.pib.gov.in/PressReleasePage.aspx?PRID=2177755&reg=3&lang=2
21 https://www.ibef.org/exports/electronic-and-computer-software-industry-in-india
22 https://rbidocs.rbi.org.in/rdocs/Bulletin/PDFs/0BULLETINJULY18072024C1D39FE2E7AB4F8893C8E207C7818398.PDF
23 Electronics segment here refers to all products under HS 85 and 5 products under HS 84 (8471-73, 8443 and 8470)
24 Values here have been computed by the authors of the publication based on data on ITC Trade Map
25 https://www.orfonline.org/public/uploads/posts/pdf/20240221230009.pdf
26 https://www.pib.gov.in/PressReleasePage.aspx?PRID=2034096&reg=3&lang=2 17Trade WatcJB July-Sept (Q2) FY 2025-26
(ECMS) and other targeted incentives to bolster domestic component ecosystems.
India has also streamlined FDI rules, improved tax and customs regimes to make the
investment climate more attractive, and aims to raise its share of global electronics
exports to 4–5% by 2030 while targeting $500 bn in production
27
.
1. Mapping the Global Electronics Trade Profile
The electronics trade profile has been examined in detail particularly under HS 85
and select top products of HS 84 at the 4-digit level. The segment reflects a $4.6 tn
of world demand with the top twelve products amounting to $3.6 tn and accounting
for 78% of the total global demand for 2024. Within the top twelve product categories
which together account for nearly $3.6 tn of global imports, India’s exports are only
$33.9 bn translating to a share of 0.9% for the top 12 segments.
India is competitive in six of these twelve segments indicated by a strong Revealed
Comparative Advantage (RCA)
28
being greater than one, but it continues to remain
import-dependent in critical electronic components such as circuits, semiconductors
and batteries. India’s exports are primarily concentrated in final-assembly products,
while the bulk of global demand and value addition is located in components and
sub-systems, where India’s export presence remains limited.
Table 1: Comparison of India’s Trade Profile for Electronics Trade, 2024
CodeProduct label
World
Imports
($bn)
Product
Share in
World
Demand
India’s
Exports
($bn)
India’s
export
share in
World
demand
India’s
Imports
($bn)
RCA
India
RCA
Competitor
Top
Exporter
and
Volume
($bn)
‘8542
Integrated
circuits
(chips)
1215.8 26.2% 0.3 0.02% 23.8 0.02 2.27
Hong
Kong
($220)
‘8517
Mobile
phones and
telecom
equipment
635.3 13.7% 22.1 3.5% 17.6 3.83 1.69
China
($214.9)
‘8471
Automatic
data-
processing
machines
and units
552.4 11.9% 1.0 0.2% 10.6 0.20 1.45
China
($160.7)
‘8473
Parts and
accessories of
machines
185.8 4.0% 0.3 0.2% 2.9 0.20 0.92
China
($34.1)
‘8544
Electric wires,
cables and
optical fibre
169.1 3.6% 2.2 1.3% 1.4 1.43 4.74
China
($31.3)
27 https://www.ibef.org/news/meity-targets-us-500-bn-electronics-production-by-2030-with-detailed-strategy
28 A country is said to have a revealed comparative advantage (RCA) in a given product i when its ratio of exports of
product “i” to its total exports of all products exceeds the same ratio for the world as a whole. If RCA takes a value
greater than unity, the country has a revealed comparative advantage in that product 18Trade WatcJB July-Sept (Q2) FY 2025-26
CodeProduct label
World
Imports
($bn)
Product
Share in
World
Demand
India’s
Exports
($bn)
India’s
export
share in
World
demand
India’s
Imports
($bn)
RCA
India
RCA
Competitor
Top
Exporter
and
Volume
($bn)
‘8504
Power
equipment
(transformers
& converters)
157.8 3.4% 3.0 1.9% 3.6 2.11 1.08
China
($46.4)
‘8541
Semiconductors
and LEDs
156.8 3.4% 1.8 1.1% 6.3 1.26 1.00
China
($48.1)
‘8507 Batteries 149.0 3.2% 0.9 0.6% 3.6 0.64 1.56
China
($66.6)
‘8536
Switches,
plugs and
circuit
protection
devices
127.6 2.8% 1.3 1.0% 2.8 1.11 1.88
China
($22.3)
‘8524
Display
panels and
touchscreens
100.4 2.2% 0.1 0.1% 4.4 0.06 3.31
China
($45.3)
‘8537
Electrical
control
panels and
switchboards
96.2 2.1% 0.9 0.9% 1.1 1.03 5.95
Germany
($15.9)
‘8528
TVs, monitors
and
projectors
87.8 1.9% 0.1 0.1% 1.0 0.09 2.57
China
($35.5)

Total for top
12
3634.0 78.4% 33.9 0.9% 79.1
Source: ITC Trade Map
Integrated circuits (HS 8542) dominate world imports, accounting for 26.2% of global
electronics demand, yet India’s presence is negligible, with an export share of just
0.02% and an RCA of 0.02. This reflects India’s continued dependence on imports
($23.8 bn) for chips, and the global value chain being led by hubs such as Hong
Kong, Taipei, China and South Korea. Automatic data processing machines and
parts (HS 8471 and 8473) refers to another set of products which account for 12% and
4% respectively, of global demand and India holds a low share and RCA. The weak
RCA indicates that India remains positioned largely as a weak supplier.
In contrast, mobile phones and telecom equipment (HS 8517) represent India’s
strongest foothold. With a product share of 13.7% in global demand, India has
achieved a 3.5% export share, a big jump from 0.1% in global demand in 2015 and
an equally high RCA of 3.83, exceeding that of major competitors. This suggests a
clear revealed comparative advantage, driven by scale manufacturing, assembly-led
integration, and policy support. Imports remain significant, indicating high import
content, but the segment demonstrates India’s ability to insert itself into large-
volume, final-assembly–oriented value chains erstwhile dominated by China. 19Trade WatcJB July-Sept (Q2) FY 2025-26
A second tier of products, electric wires and cables (HS 8544), power equipment
such as transformers and converters (HS 8504), and electrical control equipment (HS
8536, 8537) shows moderate but meaningful competitiveness. These categories have
lower global demand shares (2.5–4.4%) but India’s export shares range from 0.9% to
1.9%, with RCAs around or above 1. This indicates capability in electro-mechanical
and power-related equipment, where entry barriers are lower, domestic demand is
strong, and supply chains are less technology-intensive.
Semiconductors and LEDs (HS 8541) account for a notable share of global demand,
but India’s export share remains modest at about 1.1%. An RCA ~1 suggests emerging
capability, though the segment continues to be dominated by China due to high
capital and technology intensity. Batteries (HS 8507), display panels (HS 8524),
and TVs and monitors (HS 8528) underline structural gaps. Despite sizable global
markets, India’s export shares are below 1% and RCAs are below unity, while imports
are high. Semiconductor fabrication
29
, advanced displays, and batteries require high
capital, long gestation periods, and deep technological capabilities. These segments
are capital- and technology-intensive, with scale economies and strong incumbency
effects, explaining China’s dominance across most categories.
2. Mapping India’s Trade Profile
India’s electronics trade is also analysed at the HS-4 level. Total exports in this
segment stood at $42.1 bn in 2024, while imports amounted to $100.6 bn resulting in
a trade deficit of $58.5 bn The export basket is highly concentrated with the top five
products together accounted for $30.4 bn representing about 72.3% of total exports
in the category. In contrast, imports are also concentrated but skewed toward
a different set of products, with the top five import items totalling $62.8 bn and
accounting for roughly 62.4% of total imports in the category.
Fig 17: India’s Exports and Imports of Electronics Products (2016 to 2024)
-35.5
-49.6
-38.7
-57.8 -58.5
8.8
12.614.1
27.7
42.144.3
62.2
52.8
85.5
100.6
-80
-40
0
40
80
120
20162018 202020222024
$Billion
DeficitExportImport
Source: ITC Trade Map
India’s electronics trade structure is highly concentrated in smartphones on the
export side and structurally dependent on imports for core components. Exports
are overwhelmingly dominated by mobile phones (HS 8517), which alone account
for 52.5% of the export basket, highlighting the assembly-led nature of India’s
29 While individual states did have semiconductor plants set up before 2007, yet India adopted its first policy only in
2007 which saw limited success. In contrast, China had its first policy as early as the mid-1950’s which allowed it to
leverage the first-mover advantage. 20Trade WatcJB July-Sept (Q2) FY 2025-26
integration into global electronics value chains. This concentration reflects scale-
driven final manufacturing, where India has leveraged large global demand, cost
competitiveness in assembly, and policy support to expand exports. Beyond mobile
phones, the export basket thins out sharply. Power equipment such as transformers
and converters (7.2%), electric wires and cables (5.2%), and semiconductors and
LEDs (4.3%) form a secondary layer of exports, while parts for electric motors and
generators contribute just over 3.1%. The remaining quarter of exports is fragmented
across smaller product lines, indicating limited diversification into high-value or
technologically complex electronics.
India’s Top 5 Segment and their share in the Electronics Export Basket, 2024
(72% of export basket)
Mobile phones and
telecom equipment;
52.5%
Power equipment
(transformers &
converters); 7.2%
Electric wires, cables
and optical fibre;
5.2%
Semiconductors and
LEDs; 4.3%
Parts for electric
motors and
generators; 3.1%
Others; 27.7%
Source: ITC Trade Map
On the import side, the structure is almost the mirror image. Integrated circuits (HS
8542) dominate imports, accounting for 23.7% of the import basket, highlighting
India’s near-total dependence on external suppliers for chips which forms the
foundational input for all electronic products. Mobile phones themselves account
for 17.5% of imports, pointing to continued reliance on imported finished devices
and sub-assemblies alongside domestic assembly. Semiconductors and LEDs (6.3%),
display panels and touchscreens (4.4%), further reinforce the picture of import
dependence in high-technology, capital-intensive segments.
Fig 19: India’s Top 5 Segment and their share in the Electronics Import Basket, 2024
(62% of import basket)
Integrated circuits
(chips), 23.7%
Mobile phones and
telecom equipment,
17.5%
Automatic data-processing
machines and units, 10.6%
Semiconductors and
LEDs, 6.3%
Display panels and
touchscreens, 4.4%
Others, 38%
Source: ITC Trade Map 21Trade WatcJB July-Sept (Q2) FY 2025-26
3. Composition of India’s Electronics Exports Over Time (2015–24)
Between 2015 and 2024, global electronics demand has increasingly tilted toward a
narrower set of component and technology-intensive products. Integrated circuits
strengthened their dominance, with their share in world demand rising, gaining by
5.6% to 26.2% making chips the single largest driver of electronics trade. Batteries
also saw a sharp rise in importance, with their share increasing from 1.2% to 3.2%
reflecting the expansion of electric mobility and energy storage. Display panels and
touchscreens emerged as a significant category, growing from virtually zero to 2.2%
of world demand by 2024. Together, these shifts indicate that global demand growth
has been concentrated in core components and enabling technologies rather than
evenly spread across the electronics spectrum.
India’s position in these fast-growing demand segments remains mixed. Despite
chips accounting for nearly one-third of global electronics demand in 2024, India’s
export share in this category increased only marginally from 0.01% to 0.02%. A similar
divergence is visible in batteries and displays, India’s export shares increased by just
0.06% in batteries and 0.05% in displays.

Fig 20: India’s Changing Share in Global Demand for Key Electronics (2015-24)
-1%
0%
1%
2%
3%
4%
0%
1%
2%
3%
4%
Integrated circuits
(chips)
Mobile phones and
telecom equipment
Automatic data-
processing
machines and units
Parts and
accessories of
machines
Electric wires, cables
and optical fibre
Power equipment
(transformers &
converters)
Semiconductors and
LEDs
Batteries
Switches, plugs and
circuit protection
devices
Display panels and
touchscreens
Electrical control
panels and
switchboards
TVs, monitors and
projectors
India's share in world exports '15India's share in world exports '24Change in India's export share (2024-2015) (RHS)
Source: ITC Trade Map
India’s export gains have instead been concentrated in products where global
demand growth was modest or declining by capturing newer markets. Mobile
phones and telecom equipment illustrate this contrast clearly. While their share in
world demand fell from 18.4% to 13.7%, India’s export share rose sharply from 0.14% to
3.5%, a gain of 3.34%. This indicates that India’s export growth in this category came
primarily from capturing a larger slice of an existing market rather than from rising
global demand expansion. Similar patterns, though on a smaller scale, are seen in
electric wires and cables and in switches and circuit protection devices, where India
gained export share despite stagnant global demand.
A partial alignment between global demand shifts and India’s export performance
is visible in power equipment and electrical control panels. Power equipment
increased its share in world demand from 3% to 3.4%, while India’s export share rose
from 1.3% to 1.9%. Electrical control panels also saw modest increases on both fronts.
These segments suggest that India has been able to expand where demand growth
is incremental and supplier bases are relatively dispersed.
Finally, looking at products with the highest shares in the electronics segment
underscores the structural divergence. Chips (26.2%) and mobile phones (13.7%)
together account for nearly half of global electronics demand, yet India’s export 22Trade WatcJB July-Sept (Q2) FY 2025-26
presence is concentrated overwhelmingly in the latter. Batteries, displays, and
semiconductors and LEDs are gaining prominence within the segment, but India’s
export shares in these remain at 1.2%. Overall, the evidence suggests a growing
mismatch between the shift in global electronics demand toward input components
and India’s export gains, which remain concentrated in a few finished product
segments.
4. Mapping Global Demand and India’s Export Footprint in Key Electronics
Segments
This overview maps global demand patterns and India’s export footprint across
key electronics segments by examining the alignment between major importing
markets, dominant exporting economies, and India’s principal export destinations.
By identifying overlaps between importers and exporters, as well as concentration
in demand and supply, the analysis situates India’s electronics exports within
the broader structure of global electronics value chains, distinguishing between
processing hubs, production centres, and final consumption markets.
Table 2: Mapping Global Demand and India’s Export Footprint in Top Electronics Segment
HS Code-Prodcut
World
Demand
(2024)
($bn)
India’s
Share in
the World
Exports (%
Share)
India’s Top
Export
Destinations (%
share)
Major Global
Exporters (Share
in World Exports
%)
Top Importers
(%)
8542- Integrated
circuits (chips)
1,215.8 0.02
Hong Kong
(24.3), South
Korea (22.8),
Vietnam (13.5)
Hong Kong (20.9),
Taipei, Chinese
(15.7), China (15.2)
China (31.8),
Hong Kong
(18.7), Singapore
(8)
8517- Mobile phones
and telecom
equipment
635.3 3.5
USA (33.4),
UAE (11.7),
Netherlands
(11.4)
China (35.8),
Vietnam (9.6),
Hong Kong (9.4)
USA (18.1), Hong
Kong (9.4), UAE
(6.6)
8471- Automatic
data processing
machines and units
552.4 0.2
Russia (49.4),
UAE (22.5), USA
(6.6)
China (30.6),
Taiwan (16.1), USA
(7.6)
USA (25.6), China
(10.2), Hong
Kong (5.8)
8473- Parts and
accessories of the
machines
185.8 0.2
USA (24.8),
Malaysia (12.8),
China (9.7)
China (21), Hong
Kong (17.4), USA
(14.7)
USA (29.5), China
(12.4), Hong
Kong (11.6)
8544- Electric wires,
cables and optical
fibre
169.1 1.3
USA (19.7), UAE
(10.6), UK (6.4)
China (18.2),
Mexico (10.4), USA
(7.3)
USA (18.9),
Germany (8.8),
Japan (5)
8504- Power
equipment
(transformers &
converters)
157.8 1.9
USA (34.3), UK
(6.1), Netherlands
(5.6)
China (29.2),
Germany (7.9),
USA (5.1)
USA (18.9),
Germany (8),
China (6.5)
8541-
Semiconductors
and LEDs
156.8 1.1
USA (85.5),
Bahrain (6.7),
UAE (1.6)
China (33.5),
Hong Kong (11.2),
Singapore (7.9)
China (17), USA
(14.9), Hong
Kong (10.6)
Source: ITC Trade Map 23Trade WatcJB July-Sept (Q2) FY 2025-26
Electronic Integrated Circuits (HS Code 8542): The electronics value chain in
integrated circuits is characterized by a strong import–export overlap in East Asia.
China (31.8%) and Hong Kong (18.7%) feature simultaneously among the largest
importers and exporters (15.2% and 20.9%), indicating intensive cross-border
circulation of intermediate goods within tightly linked production networks. Despite
the scale of global trade ($1.2 tn), India’s export presence remains marginal, with
shipments largely directed toward Hong Kong and South Korea, reinforcing its
peripheral position in this segment.
Telephone Sets (HS Code 8517): Unlike integrated circuits, trade in telephone sets
shows a clearer separation between production hubs and consumption markets.
China accounts for over one-third of global exports (35.8%), while the USA alone
absorbs 18.1% of world imports. India’s 3.7% share in global exports, with a significant
concentration toward the USA (33.4%), suggests alignment with final demand
markets rather than participation in regional processing trade.
Automatic Data Processing Machines (HS Code 8471): Trade in automatic data
processing machines further highlights the dominance of East Asian manufacturing
ecosystems. China commands 30.6% of global exports, while the USA emerges
as the single largest importer (25.6%). India’s export share is marginal (0.2%) and
heavily skewed toward Russia (49.4%) and the UAE. The segment is characterized by
concentrated global production and large-scale manufacturing systems.
Parts and Accessories of Office Machines (HS Code 8473): Parts and accessories
trade is typically associated with deeper GVC integration due to its intermediate-
goods nature. China (21%) and Hong Kong (17.4%) dominate exports, while the
USA leads global imports (29.5%). India’s export share remains modest (0.2%), with
exports concentrated toward the USA and Malaysia. The limited scale of India’s
participation in this segment indicates that backward linkages into global electronics
manufacturing chains remain underdeveloped, constraining spillovers into higher
value-added activities.
Insulated Wires and Cables (HS Code 8544): Trade patterns in insulated wires
are more geographically dispersed, reflecting their use across industrial and
infrastructure activities. Export supply is led by China (18.2%), but with meaningful
shares from Mexico and the USA, while import demand is concentrated in advanced
industrial economies such as the USA and Germany. India’s 1.3% export share,
coupled with shipments toward these markets, indicates selective integration into
input industrial supply chains.
Electrical Transformers and Static Converters (HS Code 8504): Power electronics
exhibit a high degree of export concentration, with China alone supplying 29.2%
of world exports. Import demand, however, is led by large consuming economies,
particularly the USA (18.9%). India’s participation is better (1.9% of global exports), and
its strong reliance on the US market points to a narrow destination profile within this
segment.
Semiconductor Devices (HS Code 8541): Semiconductor device trade reflects a
combination of manufacturing concentration and market scale, with China dominating
exports (33.5%) while also remaining a major importer. India’s export footprint is small
(1.2%) and highly concentrated, with over 85% directed to the USA, highlighting limited
engagement with the core East Asian semiconductor trading ecosystem. 24Trade WatcJB July-Sept (Q2) FY 2025-26
Across electronics segments, global trade is marked by a strong concentration of
both demand and supply in East Asia and advanced industrial economies, with
China and Hong Kong consistently occupying central positions as both major
importers and exporters. India’s export presence remains uneven and segment-
specific, with relatively stronger participation in select electronics categories, while
remaining marginal in semiconductor-intensive segments. The destination profile
of India’s exports, often concentrated in a few large consuming markets, highlights
limited integration with core electronics production networks and underscores the
structural nature of India’s current positioning in global electronics trade.
Global Electronics Success Stories: Lessons from Leading Countries
I. Electronics Industry Front-Runners: China, Japan, and South Korea
●Sustained and Coherent State-Led Industrial Strategy: Japan’s electronics
success was built on long-term state leadership through MITI, which prioritized
the sector, coordinated government–industry action, and steered firms toward
high-technology production, turning Japan into a global electronics leader by
the 1970s–80s. This approach has been revived through major semiconductor
subsidies, support for TSMC’s Kumamoto fabs, and the state-backed Rapidus
consortium. China institutionalized a similar model through successive Five-
Year Plans, notably the 13th Plan’s innovation push and R&D spending of
about 2.4% of GDP, and the 14th Plan’s expansion of the digital economy and
large-scale infrastructure such as 5G. South Korea followed a comparable
path, combining early state direction with recent large-scale semiconductor
support, including a $23 bn package to secure leadership in chips.
●Sequential upgrading along the electronics value chain: Japanese firms
upgraded early from consumer electronics into semiconductors, electronic
components, and eventually semiconductor manufacturing equipment and
materials, segments where they still hold critical global market shares. South
Korean firms moved from assembly and contract manufacturing in the 1970s
to global leadership in DRAM (Dynamic Random-Access Memory), NAND, and
advanced displays, and is now extending this trajectory toward chip design
and system semiconductors through targeted R&D and skills programmes.
Chinese firms moved from FDI-led electronics assembly in export-processing
zones to systematic localisation of components, design, and advanced
semiconductor manufacturing, supported by National Integrated Circuit funds.
This upgrading has been reinforced by SEZ/FTZ duty and VAT suspensions,
export VAT refunds, a 15% corporate tax rate for high-tech firms, tax holidays
for chipmakers, and tariff exemptions on key semiconductor inputs.
●Investment in manufacturing capacity and R&D: Japanese and South
Korean firms have consistently maintained high R&D intensity (around 2–4%
of GDP), reinforced recently through public co-financing of advanced fabs
and packaging facilities, while Chinese firms have increasingly combined
manufacturing scale with R&D via state banks, local governments, and national
semiconductor funds. 25Trade Watch July-Sept (Q2) FY 2025-26
●Development of dense industrial clusters and integrated ecosystems:
Japan’s electronics clusters around Tokyo–Yokohama and Kansai integrate
component suppliers, precision equipment firms, and research institutions,
reinforcing technological depth. South Korea’s concentration of semiconductor
and display production in the Gyeonggi and Chungcheong regions enables
tight coordination between fabs, suppliers, and public research bodies,
supported recently by infrastructure investments in power, water, and logistics.
China scaled clustering to an unprecedented level through regions such as
the Pearl River Delta, Yangtze River Delta, and Bohai Rim, where thousands of
specialised firms co-locate.
II. Emerging Electronics Powerhouses: Thailand, Malaysia, and Vietnam
●Strategic Use of Scale, Trade, and Market Access: Thailand leveraged deep
integration into regional electronics value chains in Hard Disk Drives (HDDs)
and components and is now extending this strategy into semiconductors
through its National Semiconductor Roadmap (2025–2050), targeting THB 2.5
trillion in investments. Malaysia used early export-oriented industrialization and
FTAs to embed itself as a global E&E and semiconductor hub, with electronics
accounting for ~40% of exports. Vietnam combined trade liberalization, FTAs
(CPTPP, EVFTA, RCEP), and export-processing zones to become the world’s
5th-largest electronics exporter and 2nd-largest exporter of mobile phones,
with electronics exports exceeding USD 134.5 bn in 2024.
●From Assembly to Advanced Semiconductor Capabilities: Malaysia’s New
Industrial Master Plan 2030 policy explicitly targets design, fabrication, and
packaging, with a flagship objective to create globally competitive capabilities
in strategic applications such as EVs, renewable energy, and AI, marking a move
beyond traditional role in assembly and testing. Vietnam is following a phased
semiconductor development strategy (2024–2050), initially leveraging FDI-led
assembly and manufacturing to build scale and integration into global value
chains, and subsequently prioritizing the development of domestic design,
fabrication, and R&D capabilities to deepen local value addition over time.
●Targeted Incentives and Cost Competitiveness: Thailand offers targeted BOI
incentives like corporate income tax holidays of up to 13 years, import duty
exemptions on machinery and raw materials, and R&D-linked benefits tied to
minimum investment thresholds. Malaysia attracts semiconductor investors
with Pioneer Status (70% tax exemption up to 10 years) and Investment
Tax Allowance (60% on capital expenditure for 5 years). Vietnam combines
competitive labor costs with preferential corporate tax rates for high-tech
enterprises (as low as 10%), extended tax holidays, and ready-to-use industrial
and high-tech parks.
●Focus on New Technologies and Future Electronics: Thailand’s roadmap
prioritizes chip design, fabrication, packaging, and testing to establish a
“Made-in-Thailand” semiconductor value chain. Malaysia is pushing into
advanced semiconductor segments, including IC design and higher-end
packaging, under NIMP 2030. Vietnam aims to establish 100 chip design firms,
one fabrication plant, and 10 packaging/testing facilities by 2030, with a long-
term goal of USD 100 bn turnover by 2050. 26Trade Watch July-Sept (Q2) FY 2025-26
●Cluster Development and Ecosystem Support: All three countries promoted
geographic concentration of electronics activity: Thailand through the Eastern
Economic Corridor (EEC), Malaysia through mature clusters such as Penang’s
Bayan Lepas Free Industrial Zone, and Vietnam through large-scale industrial
and hi-tech parks in Bac Ninh, Thai Nguyen, and Ho Chi Minh City facilitating
supplier networks, logistics efficiency, and technology spillovers.
5. Assessing Domestic Performance of the Electronics Industry
The recent expansion of India’s electronics manufacturing reflects both scale
concentration and gradual broadening across segments. Mobile phones dominate
the industry, with output rising from $30 bn in FY21 to $51 bn in FY24, accounting
for 44.3% of total electronics manufacturing. This single segment has driven a large
share of the overall increase from $74.7 bn to $115 bn, underscoring its role as the
anchor of the sector’s growth trajectory.
Beyond mobile phones, the manufacturing base is evenly spread but at much
smaller scales. Consumer electronics including TVs, audio products, and accessories
expanded from $9.5 bn to $13 bn, contributing 11.3% of total output. Industrial
electronics such as power electronics, DC/AC converters and electronic components
together account for roughly one-fifth of manufacturing, with industrial electronics
at $ 12.5 bn (10.9%) and components at $ 10.5 bn (9.1%) in FY24. These segments
indicate growing domestic demand from industry and infrastructure, though their
combined scale remains well below that of mobile phones.
Table 3: Comparison of India’s Domestic Production for Electronics, 2021-24
Product Segment
FY20-21
($bn)
FY22-23
($bn)
FY23-24
($bn)
Proportion
of Total
Mobile Phones30.0 44.0 51.0 44.3%
Consumer Electronics (TV, Audio, Accessories) 9.5 12.0 13.0 11.3%
Industrial Electronics10.5 12.0 12.5 10.9%
Electronic Components9.0 10.0 10.5 9.1%
Auto Electronics6.0 7.5 8.0 7.0%
Strategic Electronics4.0 4.8 5.5 4.8%
IT Hardware (Laptops, Tablets)3.0 4.5 5.0 4.3%
LED Lighting2.2 3.0 3.5 3.0%
Telecom Equipment- 2.0 3.5 3.0%
Wearables & Hearables- 1.3 2.5 2.2%
Electronics Manufacturing (Total)74.7 101 115
Source: Ministry of Electronics & IT Annual Report
Auto electronics and strategic electronics show steady but moderate growth. Auto
electronics increased from $6 bn to $8 bn, reflecting rising electronic content in
vehicles, while strategic electronics which consists of military communication
systems, radars and sonars, network centric systems, electronic warfare systems
etc linked to defence and critical applications reached $5.5 bn, or 4.8% of total 27Trade WatcJB July-Sept (Q2) FY 2025-26
manufacturing. IT hardware, including laptops and tablets, also expanded to $5bn,
accounting for 4.3%, signaling diversification into computing hardware but from a
relatively low base.
Newer and faster-growing segments are visible but still small in absolute terms.
LED lighting rose to $3.5 bn, while telecom equipment and wearables emerged as
identifiable manufacturing segments only after FY21, together contributing just over
5% of total output in FY24. Their growth points to emerging demand niches, but
their limited scale highlights the early stage of capacity build-up.
Overall, the electronics industry remains highly concentrated, with mobile phones
accounting for nearly as much output as the next six segments combined. However,
the gradual expansion of mid-sized segments, such as industrial electronics,
components, consumer electronics, and automotive electronics, signals an emerging
opportunity for policy to deepen and diversify the manufacturing ecosystem beyond
final assembly.
6. Comparative Tariff Structure: India, China and Vietnam
A comparison of import profiles across India, China, and Vietnam highlights stark
differences in the scale across segments. China’s imports are also overwhelmingly
concentrated in integrated circuits, amounting to $386.7 bn in 2024. Vietnam follows
a similar, though smaller, pattern with $62.9 bn of chip imports, underscoring its
role as an assembly and export base within East Asian supply chains. India’s chip
imports, at $23.8 bn, are substantially lower in absolute terms, but still represent the
single largest item in its electronics import basket, signaling a strong dependence
on external suppliers for core components.
Table 4: India’s Electronics Imports: Global Volumes and Tariff Comparison (2024)
Code Product label
India’s
Imports
in $bn
(2024)
India’s
Average
Tariff %
China’s
Imports
in $bn
(2024)
China’s
Average
Tariff %
Viet-
nam’s
Imports
in $bn
(2024)
Viet-
nam’s
Average
Tariff %
‘8542 Integrated circuits (chips)23.8 1.5 386.7 2.8 62.9 1.4
‘8517
Mobile phones and tele-
com equipment
17.6 7.6 32.1 1.7 15.2 1.6
‘8471
Automatic data-process-
ing machines and units
10.6 0 56.5 3.7 4.8 1.4
‘8473
Parts and accessories of
machines
6.3 8.3 25.4 2.4 4.7 1.4
‘8544
Electric wires, cables and
optical fibre
4.4 NA 39.9 NA 16.5 NA
‘8504
Power equipment (trans-
formers & converters)
3.6 13.3 0.7 4.4 3.9 3.8
‘8541
Semiconductors and
LEDs
3.6 8.6 3.1 11.2 3.8 8.4
‘8507 Batteries3.1 2.1 25.5 2.6 2.9 1.4
‘8536
Switches, plugs and cir-
cuit protection devices
2.8 8 12 5.7 4.3 13.7 28Trade WatcJB July-Sept (Q2) FY 2025-26
Code Product label
India’s
Imports
in $bn
(2024)
India’s
Average
Tariff %
China’s
Imports
in $bn
(2024)
China’s
Average
Tariff %
Viet-
nam’s
Imports
in $bn
(2024)
Viet-
nam’s
Average
Tariff %
‘8524
Display panels and touch-
screens
1.4 9.1 5 6.8 3.5 7.8
‘8537
Electrical control panels
and switchboards
1.1 11.8 5.6 7 1.6 7.4
‘8528
TVs, monitors and projec-
tors
1 14.7 0.7 13.4 1.4 12.1
Total79.3 7.7 593.2 5.6 136 5.5
Note: Rates highlighted in red indicate the highest rate within each category and NA refers to data not available
Source: ITC Trade Map
The tariff structure reveals a clear divergence in approach. India’s average tariffs
across electronics imports are consistently higher than those of China and Vietnam,
particularly in power-related segments. For example, mobile phones and telecom
equipment attract an average tariff of 7.6% in India, compared to 1.7% in China and
1.6% in Vietnam, even as India imports $17.6 bn worth of these products. Similarly,
power equipment faces tariffs of 13.3% in India, against 4.4% in China and 3.8% in
Vietnam, despite India’s imports being comparable in size to Vietnam’s. This suggests
a more protective stance in these segments.
In component-heavy categories such as semiconductors and LEDs, switches, and
batteries, India again applies higher tariffs than its peers, despite importing smaller
volumes. Semiconductors and LEDs, for instance, face an average tariff of 8.3% in
India, compared to 2.4% in China and 1.4% in Vietnam. This contrasts with China’s
much larger import volumes ($25.4 bn) and Vietnam’s ($4.7 bn), where lower tariffs
facilitate high-throughput integration into global value chains. Batteries are an
exception where China’s tariffs are relatively high (11.2%), reflecting its strategic control
over battery supply chains, while India and Vietnam apply similar rates around 8–9%.
Display panels and touchscreens stand out as a structurally import-dependent
segment across all three economies, with large import volumes and no effective tariff
protection (NA across countries). China’s imports of $39.9 bn and Vietnam’s $16.5 bn
dwarf India’s $4.4 bn, reinforcing the concentration of display manufacturing in a
few global hubs.
Overall, the comparison points to two key structural insights. First, India’s electronics
imports are smaller in scale but more tariff-protected than those of China and
Vietnam. High import tariffs on mobile phones, for instance, has helped foster a
domestic ecosystem for finished products due to the scale of the domestic market
but this approach has not helped for components primarily because it is multi-staged
involving global integration and higher tariffs hamper participation. Second, China and
Vietnam maintain relatively low tariffs in high-volume component segments, enabling
seamless participation in dense supply chains. India’s higher tariff regime, combined
with a narrower import base, suggests a more domestic market orientation, even as
import dependence on critical inputs like chips and displays remains unavoidable.
This configuration has shaped the pattern of foreign investment in the sector, with
multinational firms responding to policy incentives and market scale by anchoring 29Trade WatcJB July-Sept (Q2) FY 2025-26
final assembly and manufacturing operations in India, while component production
continues to be largely sourced from global hubs.
7. Foreign Investment
30
Trends in the Electronics Industry
India has rapidly evolved into a key destination for electronics manufacturing,
supported by a sharp rise in investment inflows and a near six-fold expansion in
production over the past decade. Anchored by the objective of developing a $500
bn electronics manufacturing ecosystem by 2030–31, the sector has increasingly
attracted foreign capital alongside domestic investment, strengthening India’s role
in global technology supply chains. This momentum is reflected in export outcomes:
in 2024, Apple’s
31
exports from India reached a record ₹1,10,989 crore ($12.8 bn),
surpassing the ₹1 lakh crore threshold and registering 42% year-on-year growth. The
expanding manufacturing ecosystem has drawn in global OEMs as well as domestic
firms, deepening foreign investment linkages and embedding India more firmly
within the global electronics value chain.
32
Fig 21: FDI in electronics and components industry (2021-24)
0.81
2.44
1.6%
2.9%
4.3%4.6%
0%
1%
2%
3%
4%
5%
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2021202220232024
$Billion
Electronics Equity Inflow
Proportion of Equity FDI Inflow in Electronics (RHS)
Source: DPIIT
Despite domestic electronics production rising sharply from ₹5.54 lakh crore in FY21
to ₹9.52 lakh crore in FY25, India still does not manufacture mobile phones end-
to-end. A large share of critical components continues to be imported, with final
assembly carried out across more than 300 manufacturing units in India for both
domestic consumption and exports. This structural gap is being addressed through
the Electronics Components Manufacturing Scheme (ECMS).
India’s success in attracting leading mobile phone manufacturers like Apple and
Samsung should be replicated across other segments to draw in top-tier suppliers,
enabling the creation of large-scale operations. This is especially important for
component manufacturing, where long gestation periods and high capital
requirements mean that only large suppliers can afford to defer returns over
extended timelines
33
.
30 Foreign Direct Investment comprises of the sum of Equity Inflow, Reinvested Earnings and Other Capital, we have
analyzed only FDI Equity Inflow. FDI Equity Inflow forms the major component.
31 Apple’s contract manufacturers, Foxconn, Tata Electronics, and Pegatron along with Samsung and Dixon Technologies,
emerged as the principal beneficiaries of the electronics PLI scheme, establishing manufacturing facilities and scaling
up production of Made-in-India mobile phones. The five-year PLI framework enabled these firms to build domestic
manufacturing capabilities by offsetting initial scale and cost disadvantages. Foxconn and Dixon have now announced
investment plants in India.
32 https://www.pib.gov.in/PressReleasePage.aspx?PRID=2177755&reg=3&lang=2
33 https://www.niti.gov.in/sites/default/files/2024-07/GVC%20Report_Updated_Final_11zon_0.pdf 30Trade WatcJB July-Sept (Q2) FY 2025-26
The approved ECMS in October, 2025 signal a renewed policy push to deepen India’s
electronics value chain and reduce dependence on imported inputs. The scheme
reflects the government’s focus on building domestic capabilities in 11 high-value
components that are essential for sustaining large-scale electronics manufacturing.
Specifically, ECMS targets components such as printed circuit boards (PCBs),
camera module sub-assemblies, copper-clad laminates, and polypropylene films,
which form the backbone of modern electronics production. The initial tranche
of applications under ECMS indicates strong participation from leading domestic
and global manufacturers, pointing to growing industry readiness to invest in input
capabilities.
Leveraging India’s Electronics Strengths in the EU Market
The table below highlights the European Union as a large and high-value
import market for a selected set of electronics products under HS-85, with
combined imports of $344.8 bn across product categories in which India already
demonstrates revealed comparative advantage (RCA > 1).
Table 5: India-EU Electronics Opportunity (2024)
Code Product label
World
Imports
($bn)
EU
Imports
($bn)
EU Share
in World
Demand
India’s
Exports to
EU ($bn)
RCA
India
Export
Opportunity
in the EU
Market ($bn)
‘8517
Mobile phones
and telecom
equipment
635.3 146.6 23% 7.56 3.83 139.05
‘8544
Electric wires,
cables and
optical fibre
169.1 55.6 33% 0.37 1.43 55.19
‘8504
Power
equipment
(transformers &
converters)
157.8 46.1 29% 0.54 2.11 45.52
‘8536
Switches, plugs
and circuit
protection
devices
127.6 37.7 30% 0.30 1.11 37.38
‘8537
Electrical control
panels and
switchboards
96.2 31.4 33% 0.10 1.03 31.33
‘8541
Semiconductors
and LEDs
156.8 27.5 18% 0.01 1.26 27.47
Total 1342.8 344.8

8.88

335.94
Total (Segment) 752.511.27
Source: ITC Trade Map
Mobile phones and telecom equipment (HS 8517) account for USD 146.6 bn of
EU imports, while other segments such as electric wires, cables and optical
fibre, power equipment including transformers and converters, and switches
and circuit protection devices also exhibit substantial and sustained import
demand. These product groups are integral to the EU’s consumer electronics,
industrial machinery, and energy-transition value chains. India’s exports to the
EU across these six product categories total only $8.88 bn against an export
31Trade WatcJB July-Sept (Q2) FY 2025-26
opportunity of nearly $336 bn in the EU market. The gap is most pronounced
in mobile phones and telecom equipment, where India captures just $7.56 bn
despite a potential exceeding $139 bn, and in power equipment and electrical
components, where exports remain below $1 bn even as EU demand remains
substantial.
The coexistence of strong EU import demand and India’s revealed comparative
advantage in these segments indicates a high degree of alignment between
EU market requirements and India’s existing production and export capabilities.
India has already established a presence in global markets for these products,
supported by scale manufacturing, improving component ecosystems, and
competitive cost structures. However, India’s exports to the EU remain limited
relative to the size of the market, suggesting that current trade flows do not fully
reflect India’s underlying competitiveness.
The coexistence of strong EU import demand and India’s revealed comparative
advantage in these segments indicates a high degree of alignment between
EU market requirements and India’s existing production and export capabilities.
India has already established a presence in global markets for these products,
supported by scale manufacturing, improving component ecosystems, and
competitive cost structures. However, India’s exports to the EU remain limited
relative to the size of the market, suggesting that current trade flows do not fully
reflect India’s underlying competitiveness.
India’s rapid scale-up in mobile phone manufacturing and exports supported by
the PLI and PMP frameworks and large manufacturing clusters demonstrates its
ability to integrate into global electronics value chains. India has emerged as the
world’s second-largest mobile phone manufacturer and exporter, supplying major
international markets. Building on this strength, semiconductors and electronic
components represent a natural next frontier, particularly as the EU intensifies
its focus on technological sovereignty under initiatives such as the EU Chips
Act. Growing EU demand from automotive electronics, renewable energy, and
industrial applications creates scope for India to expand into assembly and testing
(OSAT/ATMP), power electronics, and component manufacturing, supported by
regulatory cooperation and standards alignment, enabling deeper India–EU
integration across electronics segments.
With the conclusion of the India–EU Free Trade Agreement, this gap presents a
clear opportunity. Reduced trade barriers, improved regulatory cooperation, and
greater certainty for investors can enable Indian firms to extend their established
global competitiveness into the EU market. Over time, this could support deeper
integration of Indian manufacturers into EU-centric value chains and facilitate a
gradual expansion of India’s share in these high-value electronics imports.
The United States and the EU together account for a substantial share of global
demand in the electronics sector, with a combined market size of approximately
$ 1.6 tn. This represents around one-third of total global electronics demand,
highlighting the strategic importance of these markets for India’s electronics
export ambitions. At present, the US imports electronics largely from countries
such as China, Mexico, Vietnam, Malaysia, and Thailand. However, reciprocal tariff 32Trade WatcJB July-Sept (Q2) FY 2025-26
rates applied by the US on these suppliers remain higher than those imposed
on India, around 20% on China and Vietnam, 25% on Mexico, and nearly 19% on
Thailand, compared to a relatively lower tariff rate of 18% for India. This relative
tariff advantage improves India’s cost competitiveness and presents a timely
opportunity for Indian electronics manufacturers to scale up exports and deepen
their penetration into the US and EU markets, thereby capturing a larger share of
global electronics trade.
8. Manufacturing and Technology Enablers for India’s Integration in Electronics
Deeper integration into global electronics value chains depends not only on final
assembly, but on the development of core technological capabilities in key input
segments. Printed circuit boards (PCBs), semiconductors, and battery management
systems (BMS) constitute the foundational building blocks that determine value
addition, supply-chain resilience, and competitiveness. Strengthening domestic
capacity in these segments is therefore central for upgrading India’s position in
electronics manufacturing.
PCBs provide the essential mechanical framework and interconnections, ensuring
that these complex circuits function reliably and efficiently. Semiconductors enable
processing, computation, and signal control across applications from consumer
electronics to industrial machinery. In battery-powered devices, particularly electric
vehicles and portable electronics, BMS is critical for regulating charge, ensuring
safety, and extending battery life. Together, these three components represent the
core technological enablers without which devices cannot operate, making them
indispensable for both manufacturing and global integration into electronics value
chains.
a. Printed Circuit Board Design (PCB)
Participation in electronics value chains requires domestic capabilities in product and
process design, particularly in PCB layout, system architecture, and manufacturing
engineering. Countries that have developed PCB design and fabrication ecosystems
are able to internalise process knowledge, meet international quality standards, and
integrate more effectively into tier-1 supplier networks. PCBs are a foundational input
in electronics manufacturing, with the global PCB market valued at $73 bn in 2024
and 50–60% of global capacity concentrated in China, highlighting their strategic
role in global value chains. In India, PCB demand reached $4.2 bn in 2024–25, yet
nearly 88% of bare PCBs worth $3.7 bn were imported, exposing a major supply-
chain vulnerability despite strong domestic electronics production.
Local PCB manufacturing remains limited at $600 mn, even as domestic sourcing
has grown at a robust 27.3% CAGR over the past three years, reflecting rising
demand from mobile phones, IT hardware and consumer electronics. Scaling PCB
production to $14 bn by 2029–30, about 10% of India’s $150 bn electronics output
target, is therefore critical for reducing import dependence, enhancing value
addition, and generating 20,000 direct and 75,000 indirect jobs through ecosystem
development.
34
34 Electronic Industries Association of India-Feedback Advisory report 33Trade WatcJB July-Sept (Q2) FY 2025-26
b. Semiconductors and Electronic Components
A major entry barrier for India into electronics GVCs is its reliance on imported
components and semiconductors. India imports roughly 90–95 % of its semiconductor
and component needs, from China, Taiwan, South Korea, and Singapore as on 2023
35
,
which have deep component ecosystems that support high value-added exports.
India has attracted semiconductor suppliers since its semiconductor mission
launched in 2021 and was also among the top six beneficiaries of U.S. trade policy–
driven supply-chain shifts, alongside economies already embedded in GVCs. India,
Malaysia, and Singapore are emerging as key destinations for new semiconductor
investments, particularly in assembly, testing, and packaging.
36
The announcement
of the Electronics Component Manufacturing Scheme has also strengthened this
trend by incentivising input suppliers and improving ecosystem viability, signalling
early but tangible supplier onshoring rather than mere trade diversion.
37
c. Energy Storage and E-Mobility Systems
Electronics value chains are increasingly shaped by demand for power electronics,
battery management systems, and control software associated with electric mobility
and energy storage. The demand for Battery Management Systems (BMS) is driven
by the increasing adoption of electric vehicles, advancement in battery technologies
and the rising demand for efficient energy storing solutions. BMS segmentation by
application remains dominated by electric vehicles, followed by renewable energy
equipment’s and then by consumer electronics in India.
38
While EVs continue
to dominate BMS demand, applications in renewable energy equipment and,
increasingly, consumer electronics further broaden the scope of opportunities
within India’s electronics value chains.
Along with above, rare earth elements are also critical inputs for semiconductors,
electric vehicles, renewable energy systems and defence electronics, and remain
subject to significant global supply-chain concentration. China currently accounts for
nearly 70% of global mining and over 90% of processing capacity
39
, creating recurring
bottlenecks
40
that have spillover effects across downstream electronics value chains.
Despite holding nearly 8% of global rare-earth reserves, India contributes less than
1% to global production.
41
Recognizing this vulnerability, the Union Budget 2026–
27 has announced Dedicated Rare Earth Corridors across Odisha, Kerala, Andhra
Pradesh and Tamil Nadu, aimed at strengthening domestic mining, processing and
manufacturing capabilities.
42
Taken together, the expansion of PCB manufacturing, semiconductor and
component ecosystems, and energy storage–e-mobility systems underscores
that India’s deeper integration into electronics global value chains will ultimately
be determined by its ability to build and sustain a skilled workforce aligned with
35 https://www.trade.gov/market-intelligence/india-semiconductor-and-electronics-industry
36 https://www.icwa.in/show_content.php?lang=1&level=3&ls_id=12465&lid=7619
37 https://carnegieendowment.org/research/2025/08/indias-semiconductor-mission-the-story-so-far?lang=en
38 https://www.kenresearch.com/industry-reports/india-battery-management-market
39 https://www.csis.org/analysis/chinas-new-rare-earth-and-magnet-restrictions-threaten-us-defense-supply-chains
40 In April 2025, China further tightened controls by restricting exports of seven rare-earth elements and related com-
pounds and magnets which have escalated in October, 2025.
41 https://www.orfonline.org/expert-speak/rare-earths-armistice-india-s-shift-from-mining-to-processing
42 https://www.pib.gov.in/PressReleasePage.aspx?PRID=2222413&reg=3&lang=1 34Trade WatcJB July-Sept (Q2) FY 2025-26
these emerging capabilities. As the sector moves from import dependence towards
higher domestic value addition, skill requirements will increasingly span advanced
design and engineering, precision manufacturing, quality assurance, and system
integration across electronics, automotive, and energy domains. Addressing these
needs will require a coordinated skilling strategy aligned with ongoing skilling
initiatives, that goes beyond basic assembly skills, focusing instead on industry-
linked training, curriculum modernisation, hands-on exposure to advanced tools
and processes, and close collaboration between industry, training institutions, and
government. Strengthening this skills backbone will be critical not only for scaling
domestic production and attracting global suppliers, but also for ensuring long-term
competitiveness, resilience, and employment generation within India’s electronics
manufacturing ecosystem.
9. Recent Developments in India’s Trade Policies: Key Updates for the Electronics
Sector
●The Electronics Component Manufacturing Scheme (ECMS)
43
: Launched
in 2025 with a total outlay of ₹22,919 crore, the scheme aims to attract both
domestic and global investment, promote higher domestic value addition,
reduce import dependence on critical components and materials, integrate
Indian manufacturers into global value chains, and support the growth of sectors
like mobile, telecom, automotive electronics. The scheme offers differentiated
incentives to manufacturers of key components and sub-assemblies (such as
PCBs, camera modules, laminates, and films), with a tenure of six years (plus
a one-year gestation period), and is expected to significantly expand India’s
electronics production capacity, employment, and exports. The Union Budget
2026–27 has announced an increase in the outlay for the ECMS to ₹40,000 crore,
signalling a strong policy push to deepen domestic manufacturing capacity
44
.
●Export Incentive Extensions via Postal Mode
45
: The Central Board of Indirect
Taxes & Customs (CBIC) amended the Postal Export (Electronic Declaration
and Processing) Regulations to allow exporters to claim key export benefits like
Duty Drawback, RoDTEP and RoSCTL, on shipments via postal services from 15
January 2026, boosting competitiveness for MSMEs, is particularly impactful for
the electronics sector, India’s leading e-commerce export, by reducing logistics-
related overhead for high-demand components and consumer devices.
●Customs Duty Rationalization
46
: In the Union Budget 2025-26, the Government of
India revised customs duties to strengthen domestic electronics manufacturing
and correct duty distortions: it increased the Basic Customs Duty (BCD) on
Interactive Flat Panel Displays (IFPDs) from 10% to 20%, while reducing the BCD
on open cell panels and related display components to 5% to rectify inverted
duty structures and support local production competitiveness in the electronics
value chain.
●Targeted Customs Duty Reductions on Mobile & Electronic Parts: The Union
Budget 2026‑27 announced exemptions on basic customs duty for certain inputs
43 https://www.pib.gov.in/PressReleasePage.aspx?PRID=2183028&reg=3&lang=2
44 https://www.pib.gov.in/PressReleasePage.aspx?PRID=2222519&reg=3&lang=1
45 https://www.pib.gov.in/PressReleseDetailm.aspx?PRID=2215141&lang=2&reg=3
46 https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=2098364&lang=2 35Trade Watch July-Sept (Q2) FY 2025-26
used in the manufacture of microwave ovens
47
and in the Budget 2024-25, the
Government reduced the Basic Customs Duty (BCD) on mobile phones, mobile
PCBA and chargers to 15% to support domestic production and consumer
affordability, while proposing exemptions on certain inputs (e.g., oxygen-
free copper for resistors and connector parts) to promote local component
manufacturing
48
.
●The India Semiconductor Mission (ISM)
49,50
: Approved in 2021 with a ₹76,000
crore outlay, ISM supports semiconductor fabrication, design, and manufacturing.
Between 2023 and 2025, 10 projects with ~₹1.60 lakh crore investment across six
states were approved, and India’s first advanced 3-nm chip design centers were
inaugurated in Noida and Bengaluru. The SEMICON India platform complements
ISM by mobilizing global industry participation, fostering partnerships, skills, and
innovation, with SEMICON India 2025 set to further highlight India’s growing role
in the global semiconductor value chain. A provision of Rs. 1,000 crore has been
made for ISM 2.0 for FY 2026–27 in budget, with a strong emphasis on industry
led research and training centres to drive technology development and create a
future ready skilled workforce
51
.
●Design Linked Incentive (DLI) Scheme
52
: Launched as part of the Semicon
India Programme, the scheme is catalyzing India’s semiconductor chip design
ecosystem by providing targeted financial incentives and access to advanced
design infrastructure to startups, MSMEs and domestic companies. As of
January 2026, the scheme has supported 24 DLI-backed chip design projects
across strategic areas such as video surveillance, energy metering, satellite
communications and IoT SoCs, leading to 16 tape-outs, 6 ASIC chips, 10 patents,
and engagement of over 1,000 specialized engineers, while leveraging more than
three times private investment, strengthening India’s indigenous semiconductor
design capabilities and reducing dependency on imports.
●Electronics Manufacturing Clusters Scheme (EMC 2.0, 2020)
53
: Aims to
build world-class industrial clusters with common facilities like plug-and-play
infrastructure and ready factory sheds. As of 2025, 11 EMCs and 2 Common Facility
Centres (CFCs) covering ~4,400 acres have been approved across 10 states,
with projected investment of ₹1.46 lakh crore and an estimated ~1.80 lakh jobs
expected to be generated. This cluster-based approach supports supply-chain
responsiveness, cost-efficient logistics, and skill development while enabling
manufacturers to scale production efficiently.
●Production Linked Incentive (PLI) Scheme for Large Scale Electronics
Manufacturing
54
: Notified on 1 April 2020 to boost domestic manufacturing
and attract investment across the mobile phones value chain, including
47 https://www.pib.gov.in/PressReleseDetailm.aspx?PRID=2222519&reg=3&lang=2#:~:text=Customs%20and%20Sur -
charge%20Exemptions,Conclusion
48 https://www.pib.gov.in/PressReleasePage.aspx?PRID=2035581
49 https://www.pib.gov.in/PressNoteDetails.aspx?NoteId=155130&ModuleId=3&reg=3&lang=2
50 https://www.pib.gov.in/FactsheetDetails.aspx?Id=149242&reg=3&lang=2
51 https://www.pib.gov.in/PressReleasePage.aspx?PRID=2224839&reg=3&lang=1#:~:text=For%20
2026%E2%80%9327%2C%20the%20Modified,outlay%20of%20%E2%82%B98%2C000%20crore.
52 https://www.pib.gov.in/PressNoteDetails.aspx?id=156811&NoteId=156811&ModuleId=3&reg=3&lang=2
53 https://www.pib.gov.in/PressReleasePage.aspx?PRID=2205046&reg=3&lang=2
54 https://www.pib.gov.in/PressReleseDetail.aspx?PRID=2115171&lang=1 36Trade WatcJB July-Sept (Q2) FY 2025-26
specified electronic components and semiconductor packaging. The scheme
provides incentives of 3%–6% on incremental sales (over the base year) of goods
manufactured in India for a five-year period, covering mobile phones and key
components. Budgetary allocation for electronics under the PLI Scheme increased
sharply from ₹5,747 crore (RE 2024–25) to ₹8,885 crore in 2025–26, underlining
the government’s commitment to scaling up electronics manufacturing and
exports.
10. Industry Insights on Strengthening India’s Electronics Trade Performance
55
India’s electronics sector has emerged as one of the fastest-growing segments
within manufacturing, driven by strong domestic demand, expanding assembly
capacity, and targeted policy support through production-linked incentives
(PLIs). India has made significant progress in mobile phone assembly, consumer
electronics, and select electronic components, positioning itself as an increasingly
important node in global electronics value chains. However, despite these gains,
India’s electronics exports continue to lag its production growth, reflecting structural
and policy constraints that limit scale, value addition, and global competitiveness.
There is a need for further strengthening of the broader electronics ecosystem to
sustain export competitiveness over the medium to long term. The key insights and
recommendations emerging from these discussions are summarized below.
●Mismatch Between Product Life Cycles and Re-import Repair Eligibility:
Electronics products typically have operational life cycles of up to 15 years, India’s
customs framework permits re-import of exported goods for repair only within
seven years of export. As a result, returns and repairs beyond this period are not
allowed under the current policy framework.
56
The gap between product life
cycles and repair eligibility highlights the need to better align trade policy with
the lifecycle characteristics of electronics products.
●Tax Treatment of Raw Materials in Battery Manufacturing: India’s battery
manufacturing sector faces a structural cost disadvantage because
VAT/GST
paid on imported raw materials is not refundable
. This raises effective input
costs and discourages investment in local production. In contrast, countries like
China have separate policies that allow refunds or rebates on such taxes, thereby
lowering costs and making their manufacturers more competitive. Exploring
a similar mechanism could significantly improve the economics of battery
manufacturing, strengthen the domestic supply chain, and align with national
priorities on
electric mobility and energy storage.
●Scaling Constraints and the Need to Build a Complete Electronics Ecosystem:
Despite recent investments, India’s electronics ecosystem remains fragmented,
with limited domestic depth in components, tooling, materials, and precision
manufacturing. Stakeholders emphasized that scale economies critical for global
competitiveness cannot be achieved through isolated firm-level incentives alone.
Instead, coordinated ecosystem development is required, including supplier
clustering, shared testing and certification infrastructure, reliable logistics,
55 A stakeholder knowledge-sharing session was held to gather industry insights on challenges and strategies for boost-
ing India’s global competitiveness in the electronics exports.
56 https://economictimes.indiatimes.com/industry/cons-products/electronics/finance-ministry-relaxes-norms-for-im-
port-of-exported-electronic-goods-for-repairs/articleshow/65782539.cms 37Trade Watch July-Sept (Q2) FY 2025-26
and access to skilled labour. Unlike China, Korea, and Taiwan, where dense
industrial clusters support rapid scale-up and cost reduction, India’s electronics
manufacturing remains geographically dispersed, limiting productivity spillovers
and supplier learning.
●Skilling for High-Technology Manufacturing and Global Quality Standards:
One of the most pressing structural requirements for India’s electronics sector
is the development of a highly skilled workforce aligned with global quality and
manufacturing standards. As India moves up the electronics value chain from
assembly to design-led and high-precision manufacturing, there is a growing
need for specialized skills in high-technology domains such as chip design,
embedded software, system integration, and advanced product testing
57
. India
targets USD 500 bn in electronics manufacturing output and around 6 mn jobs
by FY2030
58
. Achieving this ambition requires deeper integration into global
value chains (GVCs), which depends not only on scale and cost competitiveness,
but critically on consistent adherence to global quality certifications and Six
Sigma–level process discipline
59
, supported by advanced skill availability across
design, manufacturing, and testing functions.
●Addressing Cost Competitiveness in Electronics Manufacturing: To enhance
India’s competitiveness in global electronics value chains, it is essential to
systematically reduce the cumulative cost disadvantage in electronics assembly
and component manufacturing, which currently ranges from 10–14% and 14–
18% respectively, compared to global peers such as China and Vietnam. Higher
input tariffs and material costs result in a 5–6% cost disadvantage in assembly
and 4–5% in components, while logistics inefficiencies add another 2–3%. The
high cost of capital is a major binding constraint, with financing costs in India
typically ranging between 9–13%, compared to 2–7% in competitor economies
60
.
While India benefits from relatively lower labour and utility costs, aligning these
advantages with capex subsidies, tax incentives, and R&D support will be critical
to offset residual cost disadvantages.
●Building Testing, Certification, and Capability Centres: To accelerate India’s
integration into global electronics value chains, there is a strong need to expand
internationally benchmarked testing, certification, and capability centres
within India. Establishing and scaling advanced laboratories—on the lines of
globally recognised facilities such as UL would allow electronics products to
be tested, validated, and certified domestically against international standards.
Strengthening NABL- and BIS-aligned labs, alongside MeitY-supported Common
Facility Centres and private global certification players would significantly reduce
time-to-market, regulatory compliance costs, and dependence on overseas
testing facilities, which currently add delays and expenses for exporters.
●Correcting Inverted Duty Structures: India needs to enable domestic
manufacturing of electronics capital equipment by addressing the inverted duty
incidence on inputs and components used in their production. While capital
equipment for electronics manufacturing is often imported at zero customs duty,
57 https://globalskills.ficci.in/past/2023a.pdf
58 https://www.niti.gov.in/sites/default/files/2024-07/GVC%20Report_Updated_Final_11zon_0.pdf
59 https://www.pib.gov.in/PressReleasePage.aspx?PRID=2124620&reg=3&lang=2
60 https://www.niti.gov.in/sites/default/files/2024-07/GVC%20Report_Updated_Final_11zon_0.pdf 38Trade Watch July-Sept (Q2) FY 2025-26
several critical inputs, parts, and sub-parts attract duties in the range of 5% to 25%.
This inverted duty structure raises production costs for domestic manufacturers
and discourages localization of critical sub-assemblies. Addressing this distortion
through duty rationalization support the long-term competitiveness of India’s
electronics manufacturing ecosystem.
●
Market Access, Ease of Doing Business and Government Procurement : Industry
stakeholders emphasised that improved market access and a stable, predictable
regulatory environment are essential for scaling electronics manufacturing.
While ease of doing business has improved, firms, particularly MSMEs, continue
to face challenges related to approvals, customs clearances, certifications, and
compliance costs. Government procurement was identified as a critical lever to
create assured demand, especially for domestic firms that lack global scale or
established buyer relationships. Streamlining procurement norms, improving
transparency, and providing forward visibility on public demand can help
domestic manufacturers build scale and credibility.
●
Export Support and Financing Constraints : Fiscal support mechanisms remain
central to export competitiveness in electronics. Stakeholders noted that
schemes such as RoDTEP and GST reimbursements are important, but budgetary
constraints may reduce their effectiveness. To address financing gaps, industry
participants suggested expanding sector-specific export financing instruments,
including Lines of Credit and trade finance facilities, to support capacity expansion
and overseas market entry. Credit enhancement and guarantee mechanisms
were also highlighted as critical to improving MSME access to formal finance.
●
Integration into Global Value Chains (GVCs) and Anchor Investments : Deeper
integration into GVCs was identified as a strategic priority for the electronics
sector. Stakeholders highlighted that attracting global and well-established
international brands to manufacture in India would accelerate technology
transfer, improve quality standards, and create sustained demand for domestic
suppliers, including MSMEs. Such investments can generate spillover benefits
across the supply chain, facilitating skill upgrading, and integration of small firms
into global networks.
11. Way Forward
The deliberations highlight that India’s electronics sector stands at a pivotal juncture,
while domestic demand, assembly capacity, and production-linked incentives have
driven rapid growth, export performance continues to lag due to structural gaps,
cost disadvantages, and fragmented ecosystem development. Sustaining export
momentum and enhancing global competitiveness will require a coordinated
strategy that aligns industrial capabilities, fiscal support, market access, and skill
development with long-term ecosystem strengthening. The following priority
actions are recommended:
●Industrial Policy and Ecosystem Development
»Increase domestic value addition: Reorient incentive frameworks to
explicitly reward production of critical components, sustained R&D
investment, and end-to-end supply-chain integration. 39Trade Watch July-Sept (Q2) FY 2025-26
»Strengthen industrial clusters: Develop electronics manufacturing
clusters with shared testing, certification and reliability labs (EMC, safety,
environmental testing), and other necessary facilities to reduce compliance
costs and shorten product cycles.
»Strengthen high-technology skills: Create targeted skilling programs in
chip design, embedded software, system integration, and advanced product
testing to meet global standards and support the USD 500 bn electronics
manufacturing target by FY2030.
●Cost Competitiveness and Fiscal Measures
»Reduce structural cost disadvantages: Rationalize input tariffs, correct
inverted duty structures, and address logistics inefficiencies to narrow the
10–18% cost gap vis-à-vis global competitors.
»Lower input costs for strategic components: Introduce VAT/GST refunds or
rebates on imported raw materials to support battery and critical component
manufacturing and incentivize domestic capacity creation.
»Deliver coordinated fiscal support: Integrate capex subsidies, tax incentives,
and R&D support with labor and utility cost measures to enhance overall
manufacturing competitiveness.
●Market Access, Export Support, and Global Integration
»Streamline compliance and procurement: Simplify regulatory approvals,
certifications, and customs procedures, and leverage public procurement to
provide predictable demand for domestic manufacturers.
»Scale export finance mechanisms: Expand sector-specific export credit,
Lines of Credit, and guarantee instruments to support MSMEs and facilitate
capacity expansion in overseas markets.
»Deepen global value-chain integration: Attract anchor investments
from global firms for components in the ecosystem to enable technology
transfer, improve quality and standards, and generate sustained demand for
domestic suppliers. C.
POLICY AND
GEOPOLITICAL
HIGHLIGHTS 42Trade WatcJB July-Sept (Q2) FY 2025-26
C. Policy Highlights
1. Global Trade–Related Policy Updates
●
EU–Mercosur Free Trade Agreement Progress
61
: On January 17, 2026, the
European Union and the Mercosur bloc (Argentina, Brazil, Uruguay, and Paraguay)
formally signed a long-anticipated free trade agreement, concluding over 25
years of negotiation. The pact aims to eliminate tariffs on approximately 92–93%
of goods traded between the two blocs, creating one of the world’s largest free
trade zones covering 700+ mn consumers and significant shares of global GDP,
though it still requires ratification by member legislatures.
●
China’s Export Tax Rebate Adjustments
62
: In early 2026, China announced
significant changes to its export tax rebate regime, removing or reducing value-
added tax rebates on hundreds of product categories, including photovoltaic
and battery goods, effective from April 1, 2026, with full elimination for some
items by January 1, 2027.
2. India’s Trade Policy Developments
●
India-EU trade agreement signing scheduled: The India–EU FTA integrates two
major economies that together account for ~25% of global GDP and one-third of
global trade, granting India duty-free access for over 99% of exports by value and
significantly boosting goods, services, and mobility linkages was signed on 27th
January 2026.
●
India-UAE Trade & Strategic Expansion
63
: On 19 January 2026, during an official
state visit to New Delhi by UAE President Sheikh Mohamed bin Zayed Al Nahyan,
India and the UAE formally agreed on measures to expand and deepen their
economic partnership. The leaders set an ambitious target to double bilateral
trade from around USD 100 bn (in FY 2024-25) to USD 200 bn by 2032, building
on the existing Comprehensive Economic Partnership Agreement (CEPA)
framework.
3. Commodity Price Trends
64
On a quarterly basis, the all-commodity index remained broadly subdued, as
persistent weakness in energy and agricultural prices outweighed gains in metals.
Crude oil prices stayed soft amid oversupply and weaker demand, while coal prices,
after a sharp decline earlier in 2025, largely stabilised.
On an annual basis, the period was characterised by a steady rise in precious
metals, a clear downward trend in crude oil, relative stability in food prices with
mild fluctuations, and a gradual improvement in industrial metals toward late 2025,
together resulting in a broadly stable but subdued all-commodity index, capped by
ongoing oversupply conditions in key segments.
61 https://ec.europa.eu/commission/presscorner/detail/en/ip_26_113
62 https://global.chinadaily.com.cn/a/202601/21/WS69704413a310d6866eb34f16.html?
63 https://www.pmindia.gov.in/en/news_updates/joint-statement-visit-of-president-of-the-uae-his-highness-sheikh-mo -
hamed-bin-zayed-al-nahyan-to-india/?
64 https://www.worldbank.org/en/research/commodity-markets? 43Trade WatcJB July-Sept (Q2) FY 2025-26
Fig 22: Price indices across key commodity indices
Source: World Bank
Crude oil prices weakened further during the third quarter, extending the downward
trend observed through most of the year. Abundant global supply, easing geopolitical
risk premiums, and concerns over slowing demand growth in advanced economies
weighed on prices, despite occasional volatility. Food prices showed relative stability
to mild firming toward the end of 2025, following an extended period of softening
earlier in the year. While some commodities experienced short-term weather-related
fluctuations, global food prices remained contained, supported by record or near-
record production levels of major crops such as maize, rice, wheat, and soybeans.
Industrial metals prices remained resilient during the third quarter, supported by
expectations of a cyclical recovery in manufacturing activity and continued demand
linked to energy transition technologies. Prices of copper, aluminium, and nickel
were underpinned by infrastructure spending, renewable energy deployment,
and electric-vehicle supply chains, even as global industrial momentum remained
uneven. While gains were more moderate than earlier in 2025, metals prices held
firm through the quarter, reflecting tighter inventories and improving demand
prospects.
Precious metals outperformed other commodity groups throughout the third
quarter, driven by strong safe-haven demand amid geopolitical tensions, financial
market volatility, and expectations of lower global interest rates. Gold prices
continued to rise steadily, supported by sustained central-bank purchases and
investor hedging against macroeconomic and policy uncertainty.
65
Silver also
strengthened, benefiting from both safe-haven demand and growing industrial
usage, particularly in renewable energy and electronics. Platinum prices remained
supported by constrained supply conditions.
65 ttps://nypost.com/2025/12/22/business/gold-and-silver-soar-to-record-highs-as-fed-pivot-sends-yields-tumbling/ 44Trade WatcJB July-Sept (Q2) FY 2025-26
CONTRIBUTORS
Pravakar SahooProgramme Director, NITI Aayog
Nalina Sofia TDirector, NITI Aayog
Jyotika NagvanshiDeputy Director, NITI Aayog
Mala ParasharConsultant-I, NITI Aayog
Pooja TeotiaConsultant-I, NITI Aayog
Apica SharmaConsultant-I, NITI Aayog
Abhilasha MandaConsultant-I, NITI Aayog
Salome Sara PhilipsYoung Professional, NITI Aayog
Riya JindalYoung Professional, NITI Aayog
Kavya RaoYoung Professional, NITI Aayog
Nikita GondolayYoung Professional, NITI Aayog
Kruthi RajYoung Professional, NITI Aayog Notes

Trade Watch- Quarterly (July - September [Q2] FY 2025-26)