Half of India's Exports No Longer Leave Through a Port

India sold $421.3 billion of services abroad in FY2025-26 — 48.8% of everything it exported, and within $20.5 billion of its merchandise exports. The balance of payments has been rebuilt on a column no port measures.

In FY2025-26 India exported $863.1 billion of goods and services, a record. Merchandise exports were $441.8 billion. Services exports were $421.3 billion. The gap between the two columns — the thing India’s export commentary is organised around — is $20.5 billion, or 2.4% of the total. The services share is 48.8%, and that ratio is a Pheonix Research calculation: $421.3 billion divided by $863.1 billion, both components taken from the Reserve Bank of India’s balance-of-payments release. Where a ratio in this piece is ours rather than a source’s, we say so and show the two numbers it comes from.

The direction has been unbroken for years. Between FY2014-15 and FY2025-26, on the RBI’s series, services exports grew at 9.3% a year — from $158.1 billion to $421.3 billion — against 5.6% for exports as a whole, from $474.7 billion to $863.1 billion. Both are Pheonix Research calculations, and both now rest on the same base year: the FY2014-15 figures are merchandise exports of $316.5 billion and services exports of $158.1 billion, taken from the Reserve Bank’s balance-of-payments tables for that year, against $441.8 billion and $421.3 billion in FY2025-26. On the same series services rose 65.5% over the last four years, from $254.5 billion to $421.3 billion, a 13.4% annual rate, and 8.7% in the final year alone.

Our own coverage of this export cycle has been a goods story, because the country’s is. We measured an 89.82% jump in electronics exports in a single month. We measured a 0.24% fall in textile and apparel exports that hid a 16-point divergence between textiles and garments. Both counted what left a port.

The column that balances the country

The consequence is not in the export table. It is in the current account. Net services receipts — exports less imports — were $216.6 billion in FY2025-26 against a merchandise trade deficit of $337.3 billion. Pheonix Research puts the coverage ratio at 64.2%: $216.6 billion divided by $337.3 billion.

A lower figure, around 59%, circulates in commentary and we have carried it ourselves. It does not survive the annual arithmetic. A 59% ratio would require one of two things — a services surplus of $199.0 billion, or a goods deficit of $367.1 billion — and neither appears in the RBI’s release. Our reading is that the 59% comes from a partial-year cut, where the surplus and the deficit are measured over different windows. We cannot reproduce it from the annual data, so this piece uses the ratio we can show, and says why.

Add remittances, and net invisibles reached $312 billion, up 18.2% from $264 billion a year earlier. India’s current account deficit for the year was $25.2 billion — 0.6% of GDP, unchanged from FY2024-25 — even though the merchandise deficit widened by $50.4 billion, from $286.9 billion to $337.3 billion. That is the trade the country has been running: a widening goods deficit, absorbed almost entirely by a services surplus and transfers that arrive without a container.

Why the tariff architecture leaves it alone

A service export has no customs bill of entry. There is no tariff line for a delivered cloud contract, no rules-of-origin test for a payroll process, no port at which a business process can be inspected. The instruments that reshaped India’s goods trade over the past two years — the tariff schedule, the Section 301 investigations, the quota carve-outs, the exclusion of smartphones from a tariff that still hits garments — have no border handle on it. That asymmetry is not a policy choice anyone made. It is a property of the instrument.

It is not immunity, though. The analogous instruments for services are procurement rules, visa and immigration regimes, and the price a client is willing to pay — and all three are active. Delivery is also moving away from the client’s office: the share of software services exports delivered on-site fell from 9.3% to 8.3% in FY2025-26. And the fastest-growing parts of India’s technology industry are no longer the largest. NASSCOM puts FY26 industry revenue at $315 billion, up 6.1%, with exports up 5.6%; within that, IT services grew 4.1%, against 7% for business process management and 7.7% for engineering research and design.

What the goods story keeps missing

The Indian export debate is conducted in tonnes, containers and customs lines, because those are the numbers that get published monthly with a ministry’s name on them. The services column grows quietly at around 9% a year and shows up as one line in the balance of payments. Close to half of what India sells to the world is now in that line, and the country’s external accounts are being held level by it: a 0.6% current account deficit in a year when the goods deficit widened by more than $50 billion.

The conclusion this supports is not that goods matter less. It is that the two columns have different physics. Goods exports respond to tariffs, freight and capacity; services exports respond to clients, visas and wage rates. India now earns close to half its export income from the second, and has industrial policy, trade negotiation and commentary organised almost entirely around the first.

Pheonix Research covers the information technology and software industry, including the IT services segment and, within it, the India Business Process Outsourcing market — USD 48.6 billion in 2025 to USD 92.4 billion by 2033 at an 8.4% CAGR. The concentration inside that software total is taken up in the companion piece, Fifty-Four Per Cent: The Single-Market Risk Inside India’s Services Boom.