As global trade disruptions and rising costs expose weaknesses in goods exports, Budget 2026–27 must treat export competitiveness as a system-wide fiscal priority spanning productivity, logistics reliability, standards, and risk financing
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In 2025, the external environment reminded every trading country of a basic fact: trade is not just about demand, but also about delivery. When shipping routes are disrupted, freight rates fluctuate, and trade policy uncertainty rises, the “cost of getting a product to a buyer on time” becomes as important as the product itself. The World Trade Organization (WTO) flags a weaker trade outlook into 2026 and highlights how higher tariffs and uncertainty can unwind demand and disrupt planning. A separate lesson comes from the Red Sea and canal disruptions – transits and container flows can fall sharply when security and routing risks rise, forcing diversions and longer lead times. For India, this is not a background story; it is a competitiveness constraint.
Export competitiveness matters for macroeconomic resilience. A country can run a goods deficit if it earns a sufficient services surplus and attracts adequate capital inflows. However, it becomes more exposed when global financing tightens or when imports of goods rise with domestic growth.
The reason is visible in recent trade arithmetic. During April–November 2025, India’s merchandise exports were US$292.07 billion, while merchandise imports were US$515.21 billion, resulting in a merchandise trade deficit of US$223.13 billion. Services exports were stronger, and the services surplus rose to about US$134.13 billion, but this does not eliminate the underlying gap in goods trade. This is precisely why export competitiveness matters for macroeconomic resilience. A country can run a goods deficit if it earns a sufficient services surplus and attracts adequate capital inflows. However, it becomes more exposed when global financing tightens or when imports of goods rise with domestic growth.
India’s export structure also explains why the Budget’s role is pivotal. During July–September 2025, 44.29 percent of merchandise exports went to Asia, 23.82 percent to America, and 20.68 percent to Europe. The top exported product groups in that quarter were petroleum products, engineering goods, and electrical goods. These shares are not “good” or “bad” by themselves. They simply imply that competitiveness is not a single policy lever. It is a system-level problem spanning productivity, logistics, standards, credit, and incentives. The Union Budget is one of the few instruments that can move this system at scale. It can do this not by announcing targets, but by addressing three concrete constraints that exporters face: productivity and scale, trade costs and reliability, and working capital and risk.
Export competitiveness is not sustained by one-off incentives. It is sustained by a steady rise in unit values and unit efficiency. For manufacturing, that means scale, technology absorption, and quality control. For services, it means depth of capability and trust in cross-border delivery. The Budget cannot directly increase productivity, but it can finance the inputs that private firms tend to underinvest in. These include testing and certification capacity, applied research and development (R&D), worker training aligned with export sectors, and cluster-level infrastructure that lowers per-unit overheads for smaller firms.
The upcoming Budget should therefore treat standards and compliance as export infrastructure. One way is to fund a larger network of accredited testing labs and speed up certification processes. Another is to fund adoption support for small and medium enterprises (SMEs) so that quality upgrades do not remain limited to large firms.
This is also where the disruption angle comes into play. When buyers become more risk-sensitive, they demand stricter standards and shorter delivery timelines. A productivity strategy that ignores standards becomes fragile. The upcoming Budget should therefore treat standards and compliance as export infrastructure. One way is to fund a larger network of accredited testing labs and speed up certification processes. Another is to fund adoption support for small and medium enterprises (SMEs) so that quality upgrades do not remain limited to large firms.
Most debates on competitiveness focus on incentives, but trade costs often dominate the margin for mid-value exports. This is where public policy has unusually high leverage. Evidence on trade facilitation is clear that better border processes can reduce costs. The WTO has estimated that full implementation of the Trade Facilitation Agreement can reduce trade costs by an average of 14.3 percent. The Union Budget can support this through digitisation, risk-based inspections, port and customs modernisation, and the “soft” infrastructure of information systems and coordination.
Logistics costs are the other part of the same story. If inland movement is slow or unreliable, firms either hold higher inventories or miss delivery windows. Studies have estimated India’s total logistics cost at 7.97 percent of GDP in 2023–24. Even if that estimate is lower than some older narratives, the competitiveness point remains. For many export categories, reliability matters as much as average cost. The Budget’s job is to keep shifting spending towards projects that reduce time-to-port and time-at-port, not just add capacity. That implies prioritising freight corridors, port connectivity, warehousing nodes near industrial clusters, and digital systems that reduce dwell time. It also implies measuring outcomes such as average clearance time, port turnaround, and delivery-time variance.
The WTO has estimated that full implementation of the Trade Facilitation Agreement can reduce trade costs by an average of 14.3 percent. The Union Budget can support this through digitisation, risk-based inspections, port and customs modernisation, and the “soft” infrastructure of information systems and coordination.
Exporters finance production before payment. When global risk rises, the cost and availability of working capital become a binding constraint, especially for micro, small and medium enterprises (MSMEs). Budget-linked guarantees and insurance can crowd in private credit without creating open-ended subsidies. India has been moving in this direction. For example, the National Credit Guarantee Trustee Company has a Credit Guarantee Scheme for Exporters that targets collateral-free loans up to a defined ceiling for eligible exporters. The upcoming Budget should scale what works, while tightening governance to ensure rewards are linked to compliance and performance, not merely borrowing.
Incentives still matter, but they should be treated as tools for stability, not as the core strategy. The cleanest export incentives are duty and tax remissions that neutralise domestic taxes embedded in exports. In Budget 2025–26, large allocations went to the Remission of Duties and Taxes on Exported Products (RoDTEP) (INR 18,233 crore) and the Rebate of State and Central Taxes and Levies (RoSCTL) (INR 10,170 crore). These schemes support competitiveness by preventing tax cascading. However, their impact depends on predictability and timeliness. If remission rates are revised late or claims are delayed, exporters lose liquidity and pricing power. The upcoming Budget should therefore focus less on expanding the menu of incentives and more on making remissions rule-based, time-bound, and transparent.
Mission spending must be utilised to address specific bottlenecks: standards and certification gaps, first-time exporter onboarding, market intelligence, and digital trade documentation.
This is also where the Budget can do more than just introduce annual line items. The government has framed an Export Promotion Mission as an export competitiveness initiative, with a multi-year outlay. In the Budget documents, the annual provision appears as a smaller headline allocation. The competitiveness challenge is not only to fund a mission; it is to link it to measurable constraints. Mission spending must be utilised to address specific bottlenecks: standards and certification gaps, first-time exporter onboarding, market intelligence, and digital trade documentation.
First, the Budget should reframe “export support” as a pipeline from productivity to delivery. This means carving out a clearly identified competitiveness window within expenditure: logistics reliability projects, accredited labs and standards capacity, and exporter finance risk-sharing. Second, it should publish a simple accountability dashboard for the major export-facing schemes. The key metrics should be execution speed and outcomes – remission claim settlement time, export credit uptake, customs clearance times, and completion milestones for logistics projects.
Third, it should protect remission schemes but make them more credible. Credibility here means stable rates, fast refunds, and a clear formula for how rates adjust when fiscal space tightens. Fourth, it should prioritise MSME export scaling through instruments that reduce fixed costs. Exporting has a steep entry cost due to compliance, certification, documentation, and market discovery. Mission-style funding can be powerful if it is spent on these shared fixed costs rather than scattered across small events.
Mission spending must be utilised to address specific bottlenecks: standards and certification gaps, first-time exporter onboarding, market intelligence, and digital trade documentation.
Finally, it should treat the recent trade pattern as a warning. India’s services surplus is a strength, but goods competitiveness remains the harder test. The April–November 2025 numbers show that goods trade still results in a large deficit, even as services help offset it. In a world of shipping disruptions and policy uncertainty, competitiveness is a fiscal choice. The Budget is where that choice is made credible.
Arya Roy Bardhan is a Junior Fellow with the Centre for New Economic Diplomacy at the Observer Research Foundation.
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Arya Roy Bardhan is a Junior Fellow at the Centre for New Economic Diplomacy, Observer Research Foundation. His research interests lie in the fields of ...
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