NITI Aayog Eighth Trade Watch Quarterly

NITI Aayog Eighth Trade Watch Quarterly

Why in News?

Recently, NITI Aayog released the eighth edition of Trade Watch Quarterly, highlighting India’s resilient $1.84 trillion trade performance in FY2025-26.

• It provides a detailed assessment of India’s trade performance and examines the pharmaceutical sector’s competitiveness amid changing global trade conditions.

Findings of Eighth Trade Watch Quarterly Report 

• Trade Performance: India’s total merchandise and services trade reached $1.84 trillion during FY 2025–26, registering 5.4% year-on-year growth.
  • Exports expanded by 4.2%, while imports increased by 6.5%, reflecting continued integration with global markets and resilient domestic demand.
• Merchandise Trade: During Q4 FY 2025–26, merchandise exports declined by 2.8% to $112.03 billion, indicating pressure from weak external demand and global uncertainties.
  • Meanwhile, merchandise imports increased sharply by 11.9% to $195.5 billion, widening the merchandise trade deficit.
• Services Trade: India’s services sector remained a major strength. Services exports grew by 9% to $111.1 billion, while services imports rose by 4.1% to $50.7 billion.
  • The sector continued to offset part of the merchandise trade deficit.
• Export Composition: The report notes that India’s export basket remained largely unchanged compared to the previous quarter.
  • This stability indicates continued reliance on established export sectors rather than significant diversification into new product categories.
• Import Composition: The import basket remained broadly stable; however, fertilisers were replaced by aircraft, spacecraft and related parts among key imports, reflecting changing investment patterns and transportation-related demand.
• Export Destinations: Hong Kong entered India’s top ten export destinations during the quarter.
  • It recorded an impressive 54% growth, highlighting increasing market opportunities and diversification in export destinations.
• Import Destination: Switzerland recorded the highest import growth of 48.1%, primarily due to increased imports of gold, medical instruments and scientific equipment, underscoring India’s growing demand for high-value products.
• Global Services Export: India remained the world’s eighth-largest services exporter in 2025.
  • Between 2015 and 2025, services exports grew at a 10.3% CAGR, substantially higher than the global average growth rate of 6.6%.
• Other Services: The report highlights that “Other Services” emerged as the largest component of India’s services exports.
  • Telecom and IT services continued to be the second-largest category, maintaining India’s global reputation in knowledge-intensive sectors.
• Pharmaceutical Market: The combined global demand for pharmaceutical formulations and Active Pharmaceutical Ingredients (APIs) reached approximately $1.3 trillion.
  • Formulations accounted for 75% ($961.8 billion), while APIs represented $261.2 billion.
  • India performed strongly in retail medicaments and formulated drugs (HS 3004). 
  • Global imports in this category reached $571.5 billion, while India exported $22.6 billion, capturing a 4% share of global demand.
• Biopharmaceuticals: Despite rapid global growth in blood products, vaccines and immunologicals (HS 3002), India exported only $2.2 billion.
  • This accounts for a mere 0.6% share of global exports. This reveals a significant untapped opportunity.
• API Export Performance: India exported approximately $10 billion worth of APIs, representing 3.8% of global API demand.
  • However, its participation remains concentrated in lower-value segments rather than advanced pharmaceutical ingredients.
• Hormones and Analogues: The Hormones and Analogues (HS 2937) category accounted for 37.5% of global API demand, with imports reaching $97.8 billion.
  • India’s share remained extremely low at 0.3%, highlighting competitiveness challenges.
• Innovation Ecosystem: India’s life sciences innovation ecosystem strengthened significantly.
  • Patent filings increased from 440 in 2013 to 3,576 in 2023, an eightfold rise that placed India among the world’s leading patent-filing nations in pharmaceuticals and biotechnology.
• Challenges: A major concern identified is India’s low R&D intensity. Indian pharmaceutical companies spend roughly 7% of sales on R&D, compared with 15–20% globally, limiting innovation-led growth.
  • India relies on China for about 65% of its critical APIs, Key Starting Materials (KSMs), and intermediates (especially fermentation-based products).
  • Although India excels in the volume of generic medicines, it generates only a small fraction of global pharma revenue (capturing less than 4% of global pharma export value).
  • Stricter environmental compliance regulations have significantly increased both manufacturing and R&D costs domestically.
  • India currently lacks a significant foothold in higher-value market segments like biologics, biosimilars, blood products, and immunologicals.
  • Lengthy patent examination and approval processes reduce certainty for innovators and investors. Delays hinder the development of biologics, biosimilars and advanced therapeutic products.
• Policy Recommendations: The report advises producers to pivot from traditional, low-margin generic medicines toward higher-value products, advanced therapeutics, and specialized vaccines.
  • To reduce vulnerabilities to supply shocks from China, the country needs to focus on indigenizing critical active ingredient manufacturing, particularly for fermentation-based APIs.
  • Shifting the industry focus toward in-house innovation, robust R&D, and advanced tech adoption is necessary for long-term global competitiveness.
  • Expanding market access across newer regions and improving regulatory cooperation to meet strict international standards.
  • It recommends diversification of API import sources, and creation of a model pharmaceutical chapter in future FTAs covering regulatory reliance, GMP inspections, standards harmonisation, product registration and dispute-resolution mechanisms. 

FAQs:

1. What is the Trade Watch Quarterly?
Trade Watch Quarterly is NITI Aayog’s report analyzing India’s trade performance, trends, challenges, and policy opportunities.

2. When did NITI Aayog release the eighth edition?
NITI Aayog released the eighth Trade Watch Quarterly in June 2026, covering Q4 FY 2025–26.

3. What are the key findings of the report?
India’s trade reached $1.84 trillion, services exports grew strongly, and pharmaceuticals showed significant global market potential.

4. What is its significance for India’s trade sector?
It identifies growth opportunities, export trends, market diversification prospects, and competitiveness challenges across sectors.

5. How does the report help policymaking?
It provides evidence-based recommendations to strengthen exports, innovation, market access, and trade competitiveness.

Disclaimer: Information in this article is based on official announcements and public records. Regulations and implementation details may evolve over time.