Agri Exports Cushion Trade in FY25; Monsoon May Drive FY26 Gains

R. Suryamurthy

India’s agricultural and processed food exports provided much-needed ballast to merchandise trade in FY 2024–25, offsetting weaker industrial exports amid a global slowdown. With early monsoon forecasts indicating surplus rainfall for 2025, India’s trade and inflation outlook could receive a further boost — assuming favourable kharif output and stable agri-input supply chains.

The Ministry of Commerce data shows that agri and allied exports — including rice, dairy, poultry, and processed foods — were among the few bright spots, with meat, dairy and poultry products rising 12.57% to $5.1 billion. Rice exports jumped nearly 20% to $12.47 billion, aided by robust demand from West Africa and Southeast Asia, particularly in the second half after restrictions were eased.

Processed food categories also did well. Cereal preparations and miscellaneous items grew 8.71%, while tea and coffee exports rose 11.84% and 40.37%, respectively, driven by premium demand in Western markets. These gains helped lift non-petroleum exports by 6% to $374.08 billion, even as overall merchandise exports grew just 0.08% to $437.42 billion.

However, the outlook for FY26 is increasingly tied to the performance of the southwest monsoon, which directly impacts rural output, domestic food prices, and exportable surpluses. According to preliminary projections, IMD expects a 5% above-normal monsoon, while Skymet pegs it at 3% above average. This raises hopes for a strong kharif harvest, which typically accounts for nearly 60% of India’s annual foodgrain production.

A favourable monsoon could ease pressure on domestic food inflation, which remains a policy concern for the Reserve Bank of India. It may also enable the government to maintain or even liberalize export flows of rice, pulses, and other staples, reversing recent trends of curbs and quotas.

Conversely, a sub-par or uneven rainfall pattern could disrupt this delicate balance — potentially driving up prices, curbing exports, and re-igniting food inflation, which in turn would limit the RBI’s monetary flexibility and dampen rural demand.

On the import front, key agricultural inputs showed divergent trends in FY25. Pulses imports dropped by 23.45% in March, likely due to improved domestic supply and policy moves toward self-reliance. Fertilizer imports eased 2.21% during the year, but coal imports rose 20%, reflecting increased demand for agri-processing, logistics, and energy-intensive cold chains.

Total trade numbers reflected this sectoral balancing act. Merchandise plus services exports rose 5.5% to $820.93 billion, while imports climbed 6.85% to $915.19 billion, widening the trade deficit to $94.26 billion from $78.39 billion in FY24. Services exports remained robust, growing 12.45% to $383.51 billion.

Among key destinations, the US, UK, Japan, UAE, and France saw the highest export growth, suggesting India is gradually moving up the value chain, especially in processed and specialty food products.

With value-added agri exports holding firm even during global turbulence, a good monsoon in FY26 could reinforce India’s strategic pivot toward rural-led trade growth. At the same time, moderating food inflation would open space for more consistent export policies, helping exporters plan better and diversify markets.

India's trade playbook for FY26 is thus increasingly weather-linked: if the monsoon delivers, rural supply, inflation control, and export competitiveness could align — creating headroom for broader economic resilience.