India broadens export reach as US-bound shipments weaken: SBI Research

India is increasingly tapping new overseas markets as exports to the United States ease, signalling a gradual diversification of the country’s merchandise export basket, according to a new analysis by SBI Research.

The report notes that India’s merchandise exports in April–September 2025 rose 2.9% to $220 billion, compared with $214 billion in the same period last year. Exports to the US during these six months grew 13% to $45 billion, although SBI analysts caution that this rise may reflect front-loaded orders placed ahead of tariff changes. By September, exports to the US had slipped 12% year on year, pointing to a clear slowdown.

SBI Research observed that the US share of India’s total exports has been trending downward since July 2025, falling to 15% in September. The drop is primarily attributed to weaker shipments of marine products, precious and semi-precious stones, ready-made cotton garments, and cotton textiles.

At the same time, India’s exports to a wider set of destinations have expanded notably. The report highlights the UAE, China, Vietnam, Japan, Hong Kong, along with Bangladesh, Sri Lanka and Nigeria, as fast-growing markets across multiple product segments. The shift raises an important question flagged by SBI economists: Are some of these countries re-exporting Indian goods to the US?

Supporting this possibility, the report points to trade patterns in the gems and jewellery segment. Australia’s share of US imports of pearls and precious stones rose to 9% in January–August 2025, up from just 2% a year earlier. Hong Kong’s share doubled from 1% to 2% during the same period, suggesting possible rerouting of trade flows.

The SBI report also links the evolving export landscape to India’s active trade diplomacy. Recent LPG supply agreements and strategic defence partnerships have strengthened the country’s negotiating position, reinforcing India’s push to reduce its relatively high tariff regime among Asian economies while building capability in several sectors.

High tariffs in the US have weighed heavily on India’s labour-intensive industries, including textiles, jewellery, and seafood—especially shrimp, where profit margins are narrow. To mitigate the impact, the Indian government has rolled out support measures worth ₹45,060 crore, including ₹20,000 crore in credit guarantees to ease access to bank financing.

By extending collateral-free credit under the CGTMSE scheme, the government aims to improve liquidity for exporters and ensure smoother operations, especially at a time when higher US tariffs have led to a sharp decline in containerised cargo volumes headed to the American market.