Looking ahead, Bank of Baroda notes that while alternative markets currently account for smaller shares individually, deeper integration into global supply chains, improved logistics, and competitive pricing could help cushion the Indian economy from export disruptions until a comprehensive trade agreement with the US is achieved
Indian exporters are increasingly recalibrating their global trade strategies by diversifying export destinations, as sharply higher tariffs imposed by the United States and the absence of a formal bilateral trade agreement reshape trade dynamics. According to a recent report by Bank of Baroda, this transition marks a structural shift in India’s export profile, driven by both policy changes and adaptive business responses.
The report highlights a clear two-phase adjustment following changes in US trade policy in 2025. In the first phase, exporters accelerated shipments to the US after higher tariffs were announced on April 2, but before they came into full effect. During the April–August period, Indian exports to the US increased by nearly USD 6 billion year-on-year, as exporters sought to capitalise on legacy tariff rates ranging between 0.5 per cent and 10 per cent.
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The trade environment tightened significantly from August onwards
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A 25 per cent tariff imposed on August 7 was followed by a further hike to 50 per cent on August 27, which included an additional penalty linked to India’s continued imports of Russian oil
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These measures reduced the cost competitiveness of Indian goods in the US market, prompting exporters to actively seek alternatives
The second phase, spanning September to November, reflects the early signs of diversification. While the US remains a key destination, exports to non-US markets gained momentum, even as shipments to the US moderated. Exports to the rest of the world rose to USD 89.9 billion during this period, compared with USD 86.2 billion a year earlier, indicating a growing substitution effect.
Sectoral trends underscore this transition. Marine product exports witnessed a sharp decline in US market share, falling by 13.6 per cent during September–October, while shipments to China and Thailand expanded, raising their shares to 20.6 per cent and 7.3 per cent respectively. Electronic goods exporters found new opportunities in the UAE, whose share rose to 15.3 per cent from 8.8 per cent earlier. In gems and jewellery, Hong Kong emerged as a significant destination, accounting for around 11 per cent of exports.
However, the report cautions that sectors such as readymade garments, textiles and machinery remain heavily dependent on the US and require broader country-wise diversification. Average monthly exports to the US fell to USD 5.9 billion in September–October, down from USD 8.1 billion during April–August.
