Key Insights | Letting the Elephant Dance: Unlocking India’s US$500 Billion Export Opportunity

India’s post-1991 export surge has lost momentum, reflecting a policy tilt towards protectionism, weaker participation in global value chains (GVCs), and a persistently appreciated Real Effective Exchange Rate (REER). Against this backdrop, the paper proceeds to make five distinct contributions. First, using a Poisson Pseudo Maximum Likelihood (PPML) gravity model estimated on a multi-country, Harmonized System (HS)-level pooled cross-section time series dataset, it quantifies India’s unrealised merchandise export potential at approximately US$516 billion in 2022. The estimation is conducted at the product partner level and incorporates exporter applied tariffs, bilateral exchange rate terms, and standard structural controls. Exporter-side tariffs, defined as those levied by a country on its own imports, raise input costs and act as an implicit tax on export competitiveness, distinguishing this approach from specifications that focus on destination market tariffs. Exchange rate terms capture bilateral currency movements affecting price competitiveness, such that an appreciation of the exporter’s currency, or a depreciation of the importer’s currency, is associated with weaker exports. Second, it localises this gap geographically in East Asia and key neighbouring economies, including China, Pakistan, and Bangladesh, while contrasting corridors of overperformance, such as the Netherlands and the United Arab Emirates (UAE). Third, it identifies, at the product level, areas of strength and weakness that can be leveraged or addressed, particularly in thin-margin, labour-intensive segments. Fourth, it links policy and macroeconomic mechanisms to outcomes, including the reversal of tariff liberalisation, the proliferation of quality control orders (QCOs) that raise input costs, and a persistently appreciated real effective exchange rate (REER), reinforced by strong services receipts and rising remittances. Fifth, using a historically observed export employment elasticity of around 0.3, it translates the trade shortfall into labour market implications, implying a loss of roughly 20 to 24 million formal sector jobs. Finally, it proposes a feasible, workable, sequenced reform path to restore export momentum.