With services exports growing at a brisk pace and merchandise export growth stagnating, the value of the two exports is now converging. Merchandise exports have been pulled down by a decline in petroleum products exports, while growth in services is led by telecommunications and IT services.
India’s merchandise exports had a compound annual growth rate (CAGR) of only 1.2 per cent between FY22 and FY25. The slowdown is evident in FY26 as well, as with only two months left in this fiscal, merchandise exports have only covered four-fifths of last fiscals export value. In contrast, services exports climbed sharply with a CAGR of 16 per cent between FY22 and FY25. With exports valued at $348.4 billion already, as of end January FY26, as against merchandise exports valued at $366.3 billion, the gap between services and merchandise exports is rapidly narrowing.
IT, consulting lead the surge
The rapid expansion in services exports is being driven largely by India’s globally competitive technology and consulting sectors. Telecommunications, computer, and information services exports grew from $152.3 billion in FY23 to $183.3 billion in FY25, showing a 9.7 per cent growth. Other business services such as professional and management consulting saw even faster growth, with exports increasing from $80.3 billion in FY23 to $107.2 billion in FY25, translating to a CAGR of 15.5 per cent.
The rising share of professional and management consulting suggests that India is moving beyond traditional IT outsourcing towards higher-value advisory and knowledge services. According to experts this trend likely reflects India’s deep talent pool in technology and management services and the growing global demand for digital transformation, analytics, and outsourced professional expertise.
Petroleum decline slows commodity exports
In contrast, merchandise exports have been weighed down by a sharp fall in petroleum shipments. Exports of crude and other petroleum products — historically India’s largest merchandise export category — dropped from $97.5 billion in FY23 to $63.4 billion in FY25, reflecting a steep negative CAGR of about 19.4 per cent.
According to Madan Sabnavis, chief economist at Bank of Baroda, “demand for petrol products is dependent on growth in economies as well as pace at which countries are turning to renewables. This along with lower crude prices account for the export performance.”
Sarvadnya Kulkarni, founder of General Instruments Consortium reasons, “the slowdown in petroleum exports between FY23 and FY26 is largely driven by softer global crude prices, lower refining margins, and moderating demand in key markets such as Europe and parts of Southeast Asia, where economic slowdown and inventory adjustments have reduced import appetite.”
“Petroleum exports have moderated between FY23 and FY26, primarily due to the decline in global crude oil prices from about $100–110 per barrel to about $75–85 per barrel, which reduced overall export realizations”, explained Anil R, research analyst at Geojit Investments Limited.
Yet some manufacturing sectors are showing strong growth. Electronic exports, for instance, surged from $23.6 billion in FY23 to $38.6 billion in FY25, posting a robust CAGR of nearly 28 per cent. Much of this growth has been driven by smartphone exports, particularly iPhones, which India began exporting in significant volumes starting 2022, marking the country’s rising role in global electronics supply chains.
Published on March 5, 2026