India's merchandise exports up 17% in April-July, says analysis

The brief

Context

An analysis by Nandita Rajhansa and Saurabh Mukherjea of Marcellus Investment Managers argues that India's merchandise exports have entered a new regime in FY27 after a flat FY26. Exports hit $173.8 billion in April-July, up 17 percent year-on-year, with July's $44.2 billion the highest July figure on record. The authors attribute the shift to four simultaneous changes: a real-terms cheap rupee, new trade agreements with the UK (in force) and the EU (concluded), global buyers de-risking from China, and Western rearmament outstripping domestic defence industrial capacity. The piece also flags risks: an unsigned US bilateral deal, low FTA utilisation, currency reversal, shipping chokepoints and carbon border taxes.

Key facts

• Merchandise exports in April-July were $173.8 billion, up 17 percent year-on-year; the June quarter alone was $129.3 billion, up 16 percent.
• July's exports of $44.2 billion were the highest July figure on record, beating the previous July peak of $38.3 billion in 2022.
• In FY26 merchandise exports grew just 0.93 percent to $441.8 billion; March 2026 exports shrank 7.4 percent when the Strait of Hormuz closed.
• On the RBI's 6-currency REER, the rupee stood at 90.4 in July 2026 — 14.3 percent below the November 2024 peak of 105.4 and 11 percent below its 10-year average of 101.5; spot USD/INR around 94.4.
• India-UK CETA came into force on 15 July this year; the UK removed duties on 99 percent of Indian tariff lines on Day 1, with 50-plus consignments worth over $140 million shipping on day one.
• India-EU FTA concluded 27 January 2026: preferential access on 97 percent of tariff lines covering 99.5 percent of India's export value; FY25 bilateral goods trade was $136.5 billion, with India exporting $75.9 billion.
• Exports to China in April-July rose to $7.78 billion from $5.72 billion, while exports to the US barely moved, from $33.48 billion to $34.49 billion.
• Defence exports hit a record Rs 38,424 crore in FY26, up 62.7 percent, with the private sector contributing 45 percent and registered defence exporters rising to 145 from 128.

Timeline

1. February 2014Last month before now that the rupee was as cheap in real trade-weighted terms, in the wake of the taper tantrum.
2. November 2024RBI 6-currency REER cycle peaks at 105.4.
3. March 2025REER breaks below the fair-value line of 100.
4. 2025India hit with a 25 percent US reciprocal tariff, doubled to 50 percent over Russian oil purchases.
5. 2025World merchandise trade volumes grew 4.6 percent; world goods exports reached $26.26 trillion, up 7 percent. European allies and Canada raised defence spending nearly 20 percent in real terms.
6. 27 January 2026India-EU FTA concluded after nearly two decades of negotiation.
7. 20 February 2026US Supreme Court strikes down IEEPA tariffs, invalidating the 18 percent reciprocal rate India had negotiated.
8. 11 March 2026Section 301 investigation into manufacturing overcapacity opened, covering 16 economies including India.
9. March 2026Exports shrank 7.4 percent as the Strait of Hormuz closed.
10. May 2026REER touches a low of 88.1.

Who has a stake

• Indian export manufacturers (textiles, auto ancillaries, precision engineering, pharma and pharma ancillaries) — Identified as the clearest beneficiaries of the EU and UK agreements and of global demand shifts.
• Union Commerce Minister Piyush Goyal / Government of India — Reiterated India will not sign the US bilateral deal until terms give Indian exporters an edge over competitors.
• Reserve Bank of India — Its 6-currency REER is the benchmark showing the rupee at its cheapest in real terms since February 2014.
• Indian IT services firms — Growth decelerating from double digits to mid-single digits; TCS alone removed some 12,200 roles in FY26 amid H-1B fee risk and AI.
• Indian defence and aerospace component suppliers — Western rearmament capacity constraints create orders; US is the single largest destination for Indian defence exports.
• Competing exporters — Bangladesh, Vietnam, Mexico, ASEAN — Bangladesh retains EBA access to 2029, Vietnam has an EU deal since 2020, ASEAN drew a record $225 billion FDI in 2025.
• United States administration / importers — US remains India's largest single export market; legal basis for tariffs rebuilt twice this year and bilateral deal unsigned.
• World Trade Organisation — Its 2026 baseline projects 1.9 percent volume growth recovering to 2.6 percent in 2027, with Middle East conflict the swing factor.

Why it matters

India's share of world merchandise trade is still under 2 percent and goods exports have slipped from 14.1 percent of GDP in FY23 to 12.1 percent in FY25, so a sustained export upcycle would mark a break from five decades of missed manufacturing opportunity. The authors argue that for the first time in 50 years the exchange rate, market access and global demand are aligned — but the gains depend on low FTA utilisation improving, the US arrangement settling and chokepoint and carbon-border risks staying contained.