SYLLABUS
GS-3: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
Context: Recently, the Vice-Chairman of NITI Aayog released the 6th edition of the “Trade Watch Quarterly” for the 2nd Quarter of FY 2025–26 (July–September 2025) in New Delhi.
About Trade Watch Quarterly
- It is a flagship publication of NITI Aayog that provides a data-driven assessment of global and domestic trade trends, structural shifts, and emerging opportunities for India’s trade policy.
- It analyses India’s merchandise and services trade performance in the context of evolving global dynamics such as slowing but positive global trade growth, services-led expansion, and the rising role of developing economies in global trade.
- Each edition includes a thematic focus area offering deep sectoral insights.
- The Q2 FY26 (July–September 2025) edition focuses on electronics trade, examining:
- Global demand trends and India’s export footprint
- Participation in global value chains
- Structural constraints and policy gaps
- Interventions to boost competitiveness, value addition, and exports
- The report also provides forward-looking policy insights on areas like export diversification, e-commerce trade potential, Global South trade integration, and value-chain deepening.
- It serves as a policy resource for government, industry, academia, and researchers to support evidence-based trade strategy and enhance India’s global competitiveness.
Key Findings
Global Trade Context:
- The report notes that global trade growth moderated in mid-2025 but remained positive, with services outperforming goods.
- Growth was driven by higher prices and stronger performance in developing regions such as East Asia and Africa.
- Against this backdrop, India’s total merchandise and services trade grew by around 5.1% year-on-year during April–September 2025, with exports rising faster than imports, supported by robust services growth and select merchandise categories.
India’s Trade Performance:
- India’s export momentum sustained overall trade expansion despite global uncertainty.
- Services and merchandise exports recorded strong growth.
- Merchandise exports were led by electrical machinery, mineral fuels, cereals, automobiles, and precious stones.
- Smartphones, non-basmati rice, and passenger vehicles emerged as key growth drivers.
- Imports remained dominated by mineral fuels, electronics, precious stones, and fertilisers.
- India recorded strong export growth to markets such as Hong Kong, China, the UAE, and the US, though ASEAN showed some moderation.
- A key structural trend highlighted is the deepening of trade among developing economies, which has expanded nearly fourfold since 2005.
- India’s trade trajectory is increasingly aligned with this Global South rebalancing through regional value chains and new trade corridors.
Rise of E-commerce in Trade:
- The report underscores the growing role of e-commerce as a key enabler of future export growth.
- India is among the world’s top six e-commerce markets, with electronics accounting for a large share of online retail.
- Although e-commerce exports remain modest, they are projected to scale rapidly.
- They could contribute 20–30% of India’s merchandise exports by 2030, supported by improvements in logistics efficiency, regulatory facilitation, and expanding MSME participation.
Electronics as the Thematic Focus:
- Electronics has emerged as a cornerstone of India’s manufacturing and export transformation and is now the second-largest item in India’s export basket.
- India’s share in global electronics demand has grown rapidly, driven largely by mobile phone exports.
- Electronics exports have expanded significantly over the past decade, with strong performance in mobile phones, consumer electronics, and communication equipment.
- Major export markets include the United States, the United Kingdom, and the UAE.
- The sector is deeply interconnected with industries such as automotive, renewable energy, telecom, defence, and digital services, making it a powerful multiplier for industrial growth.
Structural Challenges in Electronics:
- Despite strong gains, the report highlights important structural constraints heavy dependence on imported components such as semiconductors, integrated circuits, batteries, and displays.
- Limited participation in dense intra-Asian electronics value chains dominated by East Asian economies.
- Concentration of domestic manufacturing in mobile phone assembly.
- A relatively protective tariff structure that supports assembly but raises costs for component-intensive production.
- As a result, India remains positioned more as a final-market supplier rather than a deeply integrated value-chain participant.
Moving Up the Value Chain:
- Having established scale in assembly and system integration, India is now entering the next phase of its electronics journey, shifting toward component manufacturing and higher value addition.
- This transition is supported by targeted policy measures such as:
- Electronics Components Manufacturing Scheme
- Semiconductor mission
- Customs duty rationalization
- Support for e-commerce exports
- Future competitiveness will depend on deeper integration into global electronics value chains, including printed circuit board design, semiconductor assembly and testing, power electronics, and embedded systems.
Policy Priorities Going Forward:
- The report emphasises that India’s electronics strategy must transition from assembly-led gains to ecosystem-driven growth.
- Key priorities include:
- Strengthening domestic component ecosystems and R&D
- Anchor investments to transfer technology and build supplier networks
- Logistics efficiency and tariff rationalization
- Regulatory simplification and export finance support
- Predictable domestic procurement and improved FTA utilisation
- These reforms could support India’s ambition of becoming a globally competitive electronics ecosystem and advancing its $500 billion manufacturing goal by FY2030.