Whalesbook
India's record export performance highlights a significant gap between national success and the ongoing struggles of its vital Micro, Small, and Medium Enterprises (MSMEs).
Record Exports in FY26
India's total exports of goods and services reached a record $860.09 billion in fiscal year 2025-26, a 4.22% increase from the year before. Services exports led the growth, rising 7.94% to $418.31 billion, while merchandise exports grew a more modest 0.93% to $441.78 billion. The trade deficit widened to $119.30 billion as imports grew faster at 6.47%. Commerce Minister Piyush Goyal encouraged businesses to use Free Trade Agreements (FTAs) to boost market access. The target is $2 trillion in exports by 2030, a goal considered aspirational by analysts due to global economic conditions. Geopolitical issues, like the conflict in West Asia, have also raised shipping and freight costs. Global trade volume growth is expected to slow to 0.5% in 2026.
MSMEs Face Costly Hurdles
Industry representatives are raising alarms about high compliance costs, strict testing rules, and other barriers preventing MSMEs from entering export markets. Issues include expensive loans, lack of collateral, delayed payments from foreign buyers, costly certifications, and poor access to global logistics. A significant credit gap, estimated around Rs 30 lakh crore, limits working capital and growth. Inconsistent regulations and fragmented systems further complicate trade for small firms, especially those outside major cities. These challenges reduce competitiveness, making it hard for MSMEs, which account for nearly 46% of India's exports, to grow their international presence.
Risks to India's Export Targets
These ongoing MSME difficulties pose a significant risk to India's export ambitions. New government efforts, such as the Export Promotion Mission (EPM) with a ₹25,060 crore budget, aim to tackle issues like high financing costs and credit access. However, questions remain about how effectively these programs will be implemented on the ground. Low use of current FTAs also indicates that agreements alone are not enough; deeper engagement is necessary. Without addressing these structural problems, India may miss its $2 trillion export goal by 2030, especially with a slowing global economy, rising protectionism, and global trade tariffs. While services exports bolstered FY26 performance, the goods export sector, especially for MSMEs, faces challenges that could stall growth.
Government Support Faces Execution Hurdles
Minister Piyush Goyal has pledged ongoing government support, promising to help businesses through existing programs and new measures to lower entry barriers and improve ease of doing business. Initiatives like the Export Promotion Mission (EPM) offer financial aid, including interest subsidies, collateral-free loans, and export factoring. Other programs include RoDTEP (Remission of Duties and Taxes on Exported Products) and the EPCG (Export Promotion Capital Goods) Scheme. However, analysts and industry insiders point to a disconnect between policy goals and actual implementation, especially regarding payment systems and consistent regulations. India's economic growth, forecast between 6.4% and 6.9% in 2026, depends heavily on strong exports, but MSME structural problems could slow progress. While export figures are positive, the difficulties faced by most export businesses suggest achieving long-term goals will require significant improvements in operational execution and systemic reforms.