The Indian-flagged tanker Jag Vasant, carrying liquefied petroleum gas (LPG) after transiting through the Strait of Hormuz amid the ongoing conflict in the Middle East, is seen docked at an offloading terminal along the coast in Mumbai, India, on April 1, 2026.
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The Iran war has taken a toll on India’s merchandise exports, dragging them down by more than 7% in March, and dashing hopes of a recovery in a year already marred by U.S. tariffs. Experts warn that conditions could worsen before improving.
India’s goods exports fell to $38.9 billion last month, from $42.1 billion a year earlier, according to data released Wednesday by its commerce ministry.
The slowdown was sharp across key markets. Shipments to the UAE, India’s second‑largest export destination, plunged nearly 62% year on year, while those to its biggest market, the U.S., dropped 21%.
“There has been broad‑based weakness across key export categories — with agricultural goods, textiles, chemicals, electronic goods, and gems and jewellery all registering negative growth,” global brokerage Nomura said in a report on Wednesday.
Tariffs compound pressure
For the financial year ending March 2026, goods exports rose by less than 1% to $441.78 billion, underscoring the damage caused by 50% U.S. tariffs that were in force from August last year until earlier this year. The U.S. cut tariffs on Indian goods to 18% in February.
“U.S. tariffs were a bigger drag on Indian exports this year,” Ajay Sahai, director‑general and CEO of the Federation of Indian Export Organizations, told CNBC’s “Inside India” on Thursday, adding that the Iran war had become a fresh source of uncertainty for exporters.
Sahai said multiple factors had slowed export growth and that India was unlikely to meet its target of achieving $2 trillion in exports by 2030, pushing it by about two years.
India set out that ambitious exports target in 2022, including goods as well as services. Merchandise exports hit a record $451 billion in the financial year ending March 2023, but have failed to surpass that level since.
More pain ahead
Nomura warned that Indian exporters now face a “troika of headwinds,” as the Iran war drives cost inflation, sharply raises shipping and insurance costs, and weakens global demand.
Sahai echoed the concern, noting that outside the Middle East, exporters were absorbing much of the increase in freight costs, with only part of it passed on to importers. Liquidity, he said, remains the biggest pressure point, prompting industry calls for government support.
“Even if there is a settlement in the Middle East in April, it will likely take at least two months to fully recover from the impact of the conflict,” Sahai added.
March trade data shows the Iran war had a more pronounced impact on exports than on imports. India’s imports fell 6.5% in March to $59.59 billion, largely due to lower oil imports amid supply disruptions stemming from the conflict, analysts said.
“At $12.2 billion, this is the lowest monthly oil import bill in 13 months,” Citi said in a report on Wednesday, adding that the impact of higher crude prices would appear in trade data with a one‑month lag.
India’s benchmark indexes, Nifty 50 and the BSE Sensex, were down 0.3% on Thursday.