Despite a weaker rupee and ongoing trade negotiations, India faces difficulties in elevating its mid-tech exports due to tariff distortions and sector-specific resilience, highlighting the need for strategic policy reforms.
India’s policymakers have taken several steps to shore up external finances, from emergency foreign-exchange measures to a large deposit scheme aimed at non-resident Indians that helped lift the Reserve Bank of India’s reserves. But those inflows were temporary, and the broader challenge remains: India needs more durable foreign-currency earnings if it is to strengthen its balance of payments over time.
That makes the export side of the economy crucial. Business Standard’s analysis argues that a weaker rupee should, in theory, improve the trade balance by making Indian goods more competitive, a sequence economists describe as the J-curve. The latest depreciation has been substantial, with the rupee falling against the dollar, pound, yuan and euro over the past 18 months, yet the expected improvement in the trade balance has still been hard to detect. Studies cited in the article and elsewhere have similarly found that exchange-rate changes do not translate cleanly into a better trade position for India.
The problem, according to the analysis, is not uniform across the export base. High-tech goods such as mobile phones, machinery and pharmaceuticals have responded more strongly to currency weakness, while low-tech shipments have also shown some sensitivity. The weakest link is the mid-tech segment, including textiles, footwear, plastics and furniture, where export growth has remained stubbornly limited. HSBC’s research, as summarised by Nation Press, points to this “missing middle” as a structural weakness that helps explain why currency depreciation has not delivered the broader boost many would expect.
A similar gap appears in the production chain. The article notes that intermediate goods, the components and inputs used to make final products, are being crowded out even as India expands some final-goods exports. That pattern is visible in sectors such as mobile phones, where assembly has grown quickly under the production-linked incentive scheme, but imports of parts and inputs have also surged. Research cited in the summaries suggests that exchange-rate effects on trade are uneven across sectors and often insufficient on their own to repair the trade balance.
Tariffs are a major part of the explanation. The article says Indian exporters face a sharper tariff disadvantage than peers in East Asia and the Pacific, especially in mid-tech products, while India’s own import duties can make intermediate manufacturing less competitive by creating an inverted duty structure, where inputs are taxed more heavily than finished goods. That raises costs, weakens domestic supply chains and makes it harder for rupee weakness to flow through into export gains.
There is, however, a policy opening. India has accelerated trade talks with the European Union, the UK, Oman, New Zealand and the US, while also needing faster and more modern agreements with East Asia, an important source of industrial inputs and regional supply chains. The article argues that if these deals are implemented well, and if rules of origin, compliance burdens and quality controls are handled sensibly, tariff gaps could narrow enough to give Indian manufacturers a better chance to compete. For now, the combination of a softer rupee and tariff normalisation may offer India its best shot at reviving the missing middle of its exports.
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