Widening CAD a concern, says Niti Report

NEW DELHI: The geopolitical tensions in West Asia pose risks to India's trade and macroeconomic stability by widening the current account deficit, exerting pressure on the exchange rate, the NITI Aayog said.

In its quarterly Trade Watch Report for the quarter to December 2026, released on Monday, it said the instability in West Asia has slowed the India-Gulf Cooperation Council Free Trade Agreement (FTA), affecting trade diversification and market access.

"FTAs are not a one way street, nor should they be, which is to say that in the way that we are seeing them as a tool for market access, others are seeing it as a tool for market access too," said NITI Aayog vice chairman Suman Bery.


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He highlighted that India's merchandise trade has been resilient in a tough environment, and despite apprehensions services trade was particularly strong in 2025.

"For trade economists, imports matter much more than exports. It is imports that force you to be competitive, so we should welcome the imports as much as we welcome the market access," he emphasised.

Bery pointed out that for the past 20 years, on average, India has continued to grow at 6%, signalling its macroeconomic stability.

As per the report, India's total merchandise and services trade grew steadily during the April-December 2025 period, increasing about 5.3% year-on-year to $1.37 trillion.

FTA partners have emerged as a key driver of India's trade integration in value chains, with their share in total trade increasing, reflecting deeper economic linkages and expanding market access under trade agreements, it said.

Elaborating on the gems and jewellery sector, the report said India should shift from mid-value to high-value exports; promote design-led manufacturing, cluster research and development and geographical indicator (GI)-branded products, targeting lightweight, fashion and men's jewellery.

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"India's gems and jewellery sector should strengthen trade facilitation and raw material access, align FTAs, streamline duty drawback or refunds, expand access, and improve raw material supply to cut input costs and boost MSME (micro, small and medium enterprises) margins," it suggested.

The report also pitched for expanding financial access and reducing cost of capital by enabling collateral-free lending, credit guarantees, interest subvention, export factoring and supply chain finance to ease liquidity and scale up MSMEs.