India's goods exports declined by over 7% in March to $38.9 billion, according to data released by the commerce ministry on Wednesday [1]. The drop was particularly sharp in exports to the U.S., India's largest market, which fell 21%, and to the U.A.E., the second-largest destination, which plunged nearly 62% in March [1]. The decline is attributed to a combination of factors, including the ongoing Iran war, which has driven up cost inflation, sharply increased shipping and insurance costs, and weakened global demand, according to Nomura [1].
For the financial year ending March 2026, India's goods exports rose by less than 1% to $441.78 billion, highlighting the impact of 50% U.S. tariffs that were in place from August last year until earlier this year. The U.S. reduced tariffs on Indian goods to 18% in February [1]. Ajay Sahai, director-general and CEO of the Federation of Indian Export Organizations, stated that U.S. tariffs were a bigger drag on Indian exports this year, but the Iran war has now become a fresh source of uncertainty for exporters [1].
Sahai also noted that multiple factors have slowed export growth, making it unlikely for India to meet its $2 trillion export target by 2030, potentially delaying it by about two years. Merchandise exports reached a record $451 billion in the financial year ending March 2023 but have not surpassed that level since [1]. Exporters are absorbing much of the increased freight costs, with only a portion passed on to importers, and liquidity remains a significant pressure point, prompting calls for government support [1].
March trade data indicates that the Iran war had a more pronounced impact on exports than imports. Imports fell 6.5% in March to $59.59 billion, mainly due to lower oil imports amid supply disruptions from the conflict. Citi reported that the monthly oil import bill was $12.2 billion, the lowest in 13 months, and expects the impact of higher crude prices to appear in trade data with a one-month lag [1]. India's benchmark indexes, Nifty 50 and BSE Sensex, were down 0.3% on Thursday [1].
Looking ahead, Sahai suggested that even if there is a settlement in the Middle East in April, it would likely take at least two months for exports to fully recover from the conflict's impact [1].
CONCLUSION
India's export sector faces significant challenges from the Iran war and recent U.S. tariffs, resulting in a notable decline in March exports and a subdued outlook. Market sentiment remains negative, with benchmark indexes slightly lower and experts warning that recovery will be slow even if geopolitical tensions ease. The government may need to consider additional support measures as exporters grapple with rising costs and liquidity pressures.