India’s merchandise exports delivered a strong performance in the April-June quarter of 2026, rising 15 per cent year-on-year to 129.32 billion dollars and providing meaningful support to overall economic growth. Non-petroleum, non-gems and jewellery shipments grew 12 per cent to 99.04 billion dollars, comfortably above the roughly 6.5 per cent average recorded in the previous two financial years. Yet beneath the robust headline figures, a clear divergence has emerged: high-value manufactured goods are expanding rapidly while several labour-intensive and low-margin categories continue to contract.
Strong Contribution to GDP Growth
Economists estimate that net exports added around three percentage points to GDP growth in the first quarter. Real import volumes softened in part because of disruptions linked to the conflict in West Asia, amplifying the positive contribution of exports. The overall GDP growth rate for the quarter came in at an unexpectedly firm 7.8 per cent, with the external sector playing a larger role than in recent periods.
June itself stood out. Goods exports reached a record monthly high, demonstrating resilience even as geopolitical tensions affected global shipping and energy markets. The quarter’s performance therefore reflects both volume gains in selected categories and favourable base effects relative to the more subdued growth of the preceding years.
High-Value Sectors Lead the Expansion
Engineering goods, electronics and pharmaceuticals formed the backbone of the upturn. Engineering exports rose approximately 18.1 per cent, electronics advanced 22.6 per cent and pharmaceuticals grew 6.8 per cent. These segments benefit from relatively higher margins, stronger integration into global value chains and sustained demand from both developed and emerging markets.
Electronics in particular has shown multi-year momentum, reflecting policy support for domestic manufacturing and rising global appetite for Indian-assembled or designed products. Engineering goods, long India’s largest merchandise export category, continued to gain share on the back of capital goods, auto components and industrial machinery. The strength in these areas helped lift the broader non-oil, non-jewellery export basket and contributed disproportionately to the overall value growth.
Labour-Intensive and Low-Margin Segments Under Pressure
In contrast, several traditional employment-intensive sectors recorded outright declines. Textile and readymade garment exports fell about 12.4 per cent. Leather products contracted 4.7 per cent. Shipments of fruits and vegetables dropped 10.3 per cent, ceramics and glassware plunged 25 per cent, jute products declined 13.4 per cent and tea exports fell 17.5 per cent.
Of the 31 major export sectors tracked, 11 registered year-on-year declines during the quarter. These categories typically operate on thinner margins, face intense price competition from other Asian suppliers and are more sensitive to shifts in global demand, freight costs and currency movements. Many are also more exposed to non-tariff barriers and changing buyer preferences in key destination markets.
The weakness in labour-intensive exports carries implications beyond the trade balance. These sectors employ large numbers of workers, particularly in smaller towns and rural areas. Sustained contraction can therefore slow job creation even as the headline export numbers improve.
Structural Shift in the Export Basket
The contrasting fortunes of different segments point to an ongoing structural shift. India’s export profile is gradually moving toward higher-value manufactured goods and away from traditional low-margin, labour-intensive products. Policy measures supporting electronics manufacturing, engineering competitiveness and pharmaceutical quality have begun to show results in the data. At the same time, traditional sectors have struggled to adapt to rising costs, stricter compliance requirements and stronger competition.
This evolution is not unique to the latest quarter, but the magnitude of the divergence has become more visible as overall export growth accelerated. The rise in non-petroleum, non-jewellery shipments to 99.04 billion dollars demonstrates that momentum exists outside the volatile petroleum and gems categories. Yet the composition of that growth remains uneven.
External Environment and Near-Term Outlook
Global conditions remain mixed. Geopolitical tensions have affected shipping routes and energy prices, influencing both export realisations and import costs. Demand in major advanced economies has been uneven, while competition from other manufacturing hubs continues to intensify. In this environment, India’s ability to expand high-value exports has provided a buffer, but the lagging performance of employment-heavy sectors highlights the need for targeted competitiveness measures.
Looking ahead, sustaining double-digit growth in the stronger categories will require continued improvements in logistics, trade facilitation and market access. For the weaker segments, addressing cost disadvantages, enhancing product quality and exploring new markets will be essential if they are to contribute more evenly to future expansion.
Balancing Growth and Inclusiveness
The first-quarter data illustrate both the success and the challenge of India’s current export trajectory. Strong growth in engineering, electronics and related areas has helped lift overall shipments and supported GDP. At the same time, the struggles of textiles, leather, tea and several agricultural and low-technology manufactured products show that the benefits of the export recovery are not evenly distributed across sectors or regions.
Policymakers face the task of reinforcing the momentum in high-value segments while arresting the decline in labour-intensive ones. Success on both fronts would produce a more balanced and employment-friendly export expansion. For now, the numbers confirm that exports remain a meaningful driver of growth, even as the composition of that contribution continues to evolve.
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