India must focus on reducing single-country dependencies: EY

The trade surplus with US can nearly halve by 2031 if goods and services exports grow 10% annually while imports rise 16%, EY India. With such growth rates for exports and imports, India’s trade volume close will be nearly $500 billion, EY said. “Deeper engagement with BRICS+ economies and countries covered by India’s existing and upcoming trade agreements can help broaden export markets and diversify trading relationships,” EY said in its economy watch report for October.

India’s merchandise exports to BRICS+ economies grew at a Compound Annual Growth Rate (CAGR) of 3.8% during 2015–2025, compared with 8.1% for imports. India’s growing services trade surplus, which reached 5.6% of GDP in FY26, provides a strong foundation for strengthening the country’s overall trade position, EY said. “India has scope to strengthen its services surplus by expanding beyond traditional markets and technology-services exports.

Sustained expansion of GCCs may provide another channel through which increasingly knowledge-intensive technology, engineering, analytics and governance functions are undertaken from India,” EY said. India’s high import dependence for crude oil and natural gas remains a key vulnerability, underscoring the need to progressively reduce dependence on a limited number of supplier countries, EY said. Over the longer term, India can use export promotion, selective import substitution and stronger services exports for more balanced trade relationships with key partners, EY said.

“Local-currency settlement can complement this strategy where trade flows and financial infrastructure support it,” it added. MACROECONOMIC OUTLOOK India’s underlying growth outlook remains strong with high-frequency indicators showing robust sectoral growth in spite of cost-side pressures, EY said. The Reserve Bank of India (RBI) projects India’s real GDP growth at 7.1% for the current financial year.

This implies some moderation after the strong 7.8% growth recorded in April-June quarter, EY said. “At the same time, inflation risks remain prominent,” EY said. The RBI expects CPI inflation at 6.0% in October-December and 5.7% in January-March, close to the upper end of the central bank’s 2-6% tolerance band. “In this environment, another policy rate increase at the December 2026 meeting cannot be ruled out,” EY said.

The RBI’s Monetary Policy Committee raise the repo rate by 25 basis points in October to 5.50%, the first interest rate hike in nearly four years. An important source of risk is crude oil. “A sustained increase in crude prices could simultaneously accentuate inflationary pressures and weaken growth,” EY said.