A Study on the Impact of Import and Export on Indian GDP: Analysis of 10-Year Trends of GDP, Import, and Export of Goods & Services

Abstract

The Indian economy is the fastest-growing in the world in terms of GDP growth and Purchasing Power Parity (PPP). This study aims to explore the impact of the import and export of goods and services on India’s GDP. While Indian exports have increased over the last few years, imports have grown at a significantly faster rate. An increase in exports consistently yields a positive impact on the national GDP. To capitalize on this, the Indian government is focused on signing Free Trade Agreements (FTA) globally. Recently, India signed a landmark FTA with the European Union, as well as a Comprehensive Economic Partnership Agreement (CEPA) with Gulf nations, including the UAE (in 2022) and Oman (in 2025). These agreements are expected to grant Indian exporters unprecedented access to new foreign markets, boosting future trade volumes. Although India has maintained a steady GDP growth rate since 2015-16—except the negative growth recorded in FY 2020-21—the widening trade deficit remains a concern. The growth rate of commodity exports is currently on a downward trend, while imports continue to rise. Ultimately, this study finds that both imports and exports contribute positively to the overall growth of the GDP.

Introduction

This study examines the relationship between India’s imports, exports, balance of trade, and GDP growth over the period 2015–16 to 2024–25. India has traditionally maintained a trade deficit because imports, especially crude oil and natural gas, are higher than exports. However, exports contribute positively to economic growth by improving foreign exchange earnings and increasing global competitiveness. GDP is used as an indicator of economic performance, and India has emerged as one of the world’s largest economies.

The literature review highlights that international trade, foreign investment, and economic liberalization have played important roles in India’s economic development. Previous studies found that exports, imports, and GDP have a significant long-term relationship, while government policies such as globalization, Free Trade Agreements (FTAs), and Special Economic Zones (SEZs) have influenced trade growth.

The objectives of the study are to analyze import-export trends, evaluate their impact on GDP, identify major trading commodities, study balance of trade conditions, measure trade stability, and understand the effects of government policies and global events such as COVID-19.

The research uses secondary data collected from sources such as the Press Information Bureau and Trading Economics. Statistical tools including standard deviation, coefficient of variation, and regression analysis were applied. The regression model tested whether imports and exports significantly affect GDP.

Major Findings:

• Commodity Trade:
  • India’s imports grew faster than exports during the last decade.
  • Average import growth was 6.66%, while export growth was 4.53%.
  • Imports showed higher volatility compared to exports.
  • India’s commodity trade deficit increased, reaching the highest level in 2024–25 ($288.82 billion).
  • Major imports include crude oil, electronic goods, gold, coal, and machinery.
  • Crude oil remained the largest import item with high fluctuations.
• Service Trade:
  • India performs strongly in service exports.
  • Average service exports ($241.90 billion) were higher than imports ($136.20 billion).
  • The country maintained a consistent service trade surplus.
  • IT and other service sectors contributed significantly to export growth.
• Total Trade (Goods + Services):
  • Both imports and exports increased continuously from 2015–16 to 2024–25.
  • Average imports were $667.52 billion, while exports averaged $593.88 billion.
  • India continued to experience an overall trade deficit, though services reduced the impact.
• GDP Growth:
  • India’s GDP increased from $2290 billion in 2015–16 to $4040 billion in 2024–25.
  • The COVID-19 pandemic caused a negative GDP growth rate of -5.8% in 2020–21.
  • GDP growth recovered strongly after the pandemic, reaching 7.1% growth in 2024–25.
• Regression Analysis:
  • The regression model showed a strong relationship between imports, exports, and GDP.
  • The R-value (0.978) indicates a very strong positive relationship.
  • The R² value (0.956) shows that about 95.6% variation in GDP is explained by changes in imports and exports.
  • The hypothesis testing confirmed that international trade significantly impacts India’s GDP.

Major Export Commodities:

India’s leading exports include:

1. Engineering goods
2. Petroleum products
3. Gems and jewellery
4. Electronic goods
5. Drugs and pharmaceuticals

Engineering goods had the highest average export value, while petroleum products showed the highest volatility.

Conclusion

From the above analysis, it can be concluded that- 1) India always has a negative balance of trade due to excess of total import over total export during the period of study. 2) The average growth rate of import (i.e. 7.02) is greater than the average growth rate of export (i.e. 6.53). This is the reason for the continuous trade deficit of India. 3) Both the import and export had high volatility. But the volatility of import (i.e. standard deviation is 174.18 & coefficient of variation is 26.02) is greater than the volatility of export (i.e. standard deviation is 152.55 & coefficient of variation is 25.69). While India faced a constant trade deficit in commodities, India’s service sector acted as a vital economic hedge. India had achieved a constant trade surplus in service. The trade surplus in service increased from US dollars 69.71 billion to US dollars 188.56 billion, which is a significant rise in trade surplus during the last 10 years. 4) The efficiency of the service sector is highlighted by its export-to-import ratio. In the most recent financial year (2024-25), the export of services was 1.96 times the value of service imports, contributing to a record trade surplus in services of $188.56 billion. 5) India had the highest crude oil imports in the financial year 2022-23, which is USD 209.40 billion. The average value of the import of crude oil is US dollars 120.09 billion. The import of crude oil has surged about 198% during the last 10 years. It might be due to the growth and expansion of our economy. India has a greater dependency on electronic goods imported next to crude oil. Electronic goods had the second-highest average import of USD 62.15 billion during the period of study. 6) Engineering goods have emerged as the powerhouse of primary export with an average export value of USD Dollar 87.90 billion. Other leading sectors in Indian exports include petroleum products, drugs and the pharmaceutical sector. 7) The growth rate of commodity exports is highly \"inconsistent and volatile.\" The standard deviation of the growth rate (16.42) is nearly four times higher than the average growth rate (4.53%), as evidenced by the sharp drop to a mere 0.08% growth in 2024-25. 8) As noted in the literature review, India’s export profile has undergone a \"significant transformation\". There is a clear shift away from traditional sectors like agriculture toward high-value sectors such as pharmaceuticals (which reached a peak of $31.20 billion in 2024-25) and engineering goods. 9) The statistical analysis confirms that imports and exports are highly reliable predictors of India\'s GDP. The R-square value of 0.956 indicates that 95.6% of the change in GDP can be explained by changes in import and export levels, proving a \"strong positive relationship\".

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Copyright

Copyright © 2026 Devmalya Khan. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.