India needs to diversify its export markets and import sources while reducing dependence on individual countries to strengthen trade resilience and domestic value addition, according to a report by EY India.

The report highlights India's significant trade imbalances, with the United States accounting for 33.8% of its merchandise trade surplus with surplus countries in 2025, while China represented 24.6% of its merchandise trade deficit with deficit countries.

EY estimates that India's trade surplus with the US could nearly halve by 2031 if imports grow annually by 16% compared with 10% growth in exports. Under this scenario, India's total trade volume could approach $500 billion.

The report recommends strengthening trade relationships with BRICS+ economies and countries covered under existing and upcoming free trade agreements. It also highlights opportunities to expand services exports, particularly in technology, engineering, analytics and Global Capability Centres (GCCs).

Reducing dependence on limited sources for crude oil and natural gas, promoting domestic manufacturing and encouraging local-currency trade settlements are among the other measures suggested by EY.

EY also noted that India's economic growth outlook remains strong, with the RBI projecting GDP growth of 7.1% for the current financial year. However, rising crude oil prices and inflation remain key risks to the country's economic outlook.