India's total trade grew 5.4% in Q4 FY2026, reaching $1.84 trillion, according to a report by NITI Aayog. The report highlights a narrowing gap between services exports and merchandise exports, with services exports rising to $421 billion in FY2026 compared to merchandise exports of $442 billion. The services trade surplus increased from $47.9 billion in Q1 to $60.4 billion in Q4, helping offset the merchandise trade deficit.
Merchandise Trade Trends
Merchandise trade in Q4 showed mixed performance. Merchandise exports declined 2.8% to $112.03 billion, while imports surged 12% to $195 billion. Despite the export contraction, the overall trade growth was supported by strong services performance.
| Indicator | Q4 FY2026 | Change |
|---|---|---|
| Merchandise exports | $112.03 billion | -2.8% |
| Merchandise imports | $195 billion | +12% |
| Services exports | $111 billion | +9% |
| Services imports | $50.7 billion | +4.1% |
| Services trade surplus | $60.4 billion | (from $47.9B in Q1) |
Services Trade Surge
Services exports remained a key pillar of external sector stability, according to the report. In Q4 alone, services exports grew 9% to $111 billion, while services imports rose 4.1% to $50.7 billion. The services surplus of $60.4 billion in Q4 compares to $47.9 billion in Q1, showing a steady increase through the fiscal year.
"Services exports remained a key pillar of external sector stability, with the services surplus rising from $47.9 billion in Q1 to $60.4 billion in Q4, helping offset the merchandise trade deficit," the report added.
For the full fiscal year FY2026, services exports stood at $421 billion, closely trailing merchandise exports of $442 billion. This marks a significant narrowing of the gap between the two export categories.
Pharmaceutical Exports Growth
India also strengthened its position in the global pharmaceutical market. The country's pharmaceutical exports reached $25.8 billion in 2025, with formulated drugs (HS 3004) accounting for the majority at $22 billion. India's global export share in formulated drugs increased from 3.2% to 4% between 2015 and 2025.
Implications for Trade Professionals
The data underscores the growing importance of services exports in India's trade balance. For importers and exporters, the rising services surplus provides a buffer against merchandise trade deficits, potentially easing pressure on the rupee and current account. The strong growth in pharmaceutical exports, particularly in formulated drugs, signals opportunities for exporters in this sector. Customs brokers and trade policy analysts should monitor further developments in services trade liberalisation and pharmaceutical export incentives.
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