Union commerce minister Piyush Goyal recently cheered India signing its Free Trade Agreement with New Zealand, its 7th FTA during prime minister Narendar Modi’s time in the chair. The considerable rise in India’s trade (im)balance, despite a higher composition of imports than exports signals a shift in its economic geography. To policymakers and observers, the headline numbers may also seem reassuring of the nation’s integration into global value chains. Despite a weakening rupee that has put India’s currency in the bracket of the worst performing Asian currencies, the economy’s export numbers look impressive in the aggregate. However, a closer reading of the data reveals a far more uneven and structurally revealing story. The release of the RBI Handbook of Statistics on Indian States 2024-25 warrants a rigorous interrogation of the underlying structural dynamics in India’s changing trade concentration and export-linked economic geography. The geography of India’s trade is becoming perilously lopsided because the export engine is now powered by a shrinking and exclusive cluster of states. The top five exporting states including Maharashtra, Gujarat, Tamil Nadu, Karnataka, and Uttar Pradesh now command nearly 70% of the national export basket. While clustering is natural, the speed of this concentration is alarming.Between FY2018 (the 2018 financial year) and FY2021 the top 10 states contributed roughly 84% of India’s total exports. By FY2022-25 that figure reached 91%, implying that the remaining 20-plus states are fighting over a single-digit slice of the global trade pie. Even within this elite club a recalibration is visible as Gujarat’s share surged from 21.9% to 31.0% while Maharashtra’s contracted. This signals a profound consolidation of industrial capacity along specific corridors that offer the path of least resistance for global capital.This concentration is sector-specific, not incidental. A deepening crisisGujarat’s rising share is anchored in petroleum products, chemicals, and refined fuels linked to large refinery, port complexes. Maharashtra remains dominant in gems and jewellery, pharmaceuticals and services-linked manufacturing. Tamil Nadu’s strength lies in automobiles, auto components, machinery and electronics while Karnataka combines electronics, aerospace components and IT-enabled manufacturing. Uttar Pradesh’s recent gains are concentrated in mobile phone assembly and light engineering around Noida. These states benefit from dense supplier ecosystems, logistics-ready industrial corridors and disproportionate access to PLI-linked investment and foreign capital, advantages that lagging states lack.This creates a deceptive narrative where the national average masks a deepening regional crisis. Firms increasingly benefit from spatial clustering rather than spreading out to newer regions driven by powerful agglomeration economies. Areas of divergenceIn technical terms the Herfindahl-Hirschman Index of India’s export geography is rising, signalling a dangerously top-heavy trade engine. Instead of lagging regions catching up, we are witnessing a hardening pattern where the coastal belts of the South and West integrate tighter into global supply chains while the vast demographic heartland of the North and East effectively decouples.To understand why this divergence is accelerating one must look beyond volume to capability stacking (the process of layering distinct industrial advantages to create a unique ecosystem). The peninsular advantage is no longer just about access to the sea but about layering ports dense supplier ecosystems and specialised industrial districts. This is most visible in high-growth sectors like electronics where exports surged around 45% year-on-year in recent months. Momentum is driven by demand from markets like the US and UAE that require rigorous compliance and just-in-time delivery. Global buyers are prioritising quality logistics and vendor depth over low labour costs. Consequently, the peninsula is exporting complexity while the hinterland remains trapped in ubiquity. Research on economic complexity shows that states like Tamil Nadu possess a dense product space allowing movement into adjacent higher-value manufacturing such as advanced electronics and automation. In contrast states like Bihar are locked into exporting simple agricultural goods with few linkages to high-value sectors effectively walling them off from modern trade networks. This divergence forces a sharp question upon policymakers regarding how the hinterland can leapfrog into high-value manufacturing when it lacks the decades of industrial layering required to make that jump possible.The divergence is further entrenched by a shift in export destinations. For FY2023-24, the US commanded a 17.90% share of Indian merchandise exports followed by the UAE at 8.23% and the Netherlands at 5.16%. As trade pivots toward these high-standard markets, the benefits accrue almost exclusively to coastal states equipped to meet their stringent requirements. With global merchandise trade growing slowly, marginal export gains accrue to economies with scale and reliability. The foreign policy pivot is effectively a coastal pivot leaving interior states disconnected from the lucrative trade corridors opening up in the West and the Gulf.The failure of the hinterland to converge is ultimately a failure of state capacity and financial depth that creates a vicious cycle where the poor subsidize the rich. The RBI’s data on Credit-Deposit or CD Ratios offers a stark financial MRI of this divide. In export powerhouses like Tamil Nadu and Andhra Pradesh the CD ratio frequently surpasses 90% implying a high velocity of money where local savings are aggressively recycled into local industry. In contrast in the hinterland states of Bihar and Eastern Uttar Pradesh the ratio languishes below 50%. This indicates a perverse form of capital flight where the savings of the hinterland are deposited in banks only to be lent out to projects in the industrialized coast. The hinterland is thus exporting its capital and its labour but importing its goods which is a classic dependency relationship that drains its potential for endogenous growth.InvestmentThe root cause of this hardening inequality lies in the smoking gun of investment data. Exports are concentrating because investment concentrated first. The FDI Fact Sheet (October 2019-September 2025) reveals that the top six states captured a staggering 91% of total FDI equity inflows. Maharashtra alone attracted US $ 88.7 billion accounting for 31% of the national total followed by Karnataka at 20% and Gujarat at 16%. With over 90% of foreign equity capital flowing into just a handful of states a structural feedback loop known as path dependence (where historical decisions constrain future possibilities) has been created. Global capital builds the infrastructure and vendor base in these specific regions making them even more attractive for the next wave of investment while latecomer states face a moving target that is nearly impossible to hit.This deep-seated divergence poses a severe stress test for the vision of a Viksit Bharat by 2047. Despite rising exports PLFS data shows manufacturing employment has remained stuck at around 11-12% of total employment which underscores the limited labour absorption of the current export model. More recently, trade economists like Arvind Panagariya have argued that export-led growth is critical for sustaining high growth rates and generating mass employment because domestic consumption alone cannot drive an economy to developed status. The math is unforgiving as India cannot reach an 8-10% sustained growth trajectory if only four or five states are firing. If the peninsular states operate as middle-income ones integrated into global value chains while the North remains an agrarian anchor disconnected from trade, India risks fracturing into a dual economy. If export participation does not widen beyond the peninsula, India’s growth ceiling will be set not by ambition but by geography.Deepanshu Mohan is Professor of Economics and Dean, O.P. Jindal Global University. He is Director for Centre for New Economics Studies (CNES) and currently Visiting Professor, London School of Economics and an Academic Research Fellow at University of Oxford. Ankur Singh is a Research Assistant with CNES and is studying economics at Jindal School of Government and Public Policy.Ankur Singh contributed to this article.