The West Asia crisis did have an impact on India’s exports to the region. File.
| Photo Credit: Reuters

The story so far: India’s trade deficit in October surged by 141% in October 2025 to $21.8 billion. While this is a seemingly alarming jump, underlying data show that things aren’t all that bad, with India’s exports displaying some resilience in the face of significant headwinds, and its imports being disproportionately affected by the import of a few items.

What happened to India’s trade balance?

Trade balance is the difference between imports and exports. If the imports exceed exports, then it is called a trade deficit. If exports exceed imports, then it is a trade surplus. In October 2025, India’s trade deficit expanded to $21.8 billion from $9.05 billion in the same period last year. Various factors can lead to the widening of a trade deficit. Exports can shrink, imports can swell, or imports can simply grow faster than exports. In October 2025 not only did imports swell, but exports also shrank marginally. In both cases, the main reason was India’s merchandise trade rather than its services trade.

How did India’s exports perform?

India’s total exports in October 2025 shrank 0.7% to $72.9 billion. This was due to a shrinkage in merchandise exports, which fell by 11.8% to $34.4 billion. Services exports, on the other hand, grew 11.9% in October 2025.

It is important to note that the performance of India’s merchandise exports in October — although relatively poor — was not bad enough to change the long-term performance of the country materially. That is, over the full April-October 2025 period, total exports grew 4.8%. Within this, merchandise exports grew 0.6% while services exports grew 9.75%.

In fact, as Commerce Secretary Rajesh Agrawal pointed out during the press briefing, India recorded its highest-ever quarterly exports in both Q1 and Q2, which culminated in the highest-ever export performance for the first half of any financial year. A lot of this performance was due to the strength of India’s services exports.

The major headwinds to India’s exports currently, namely the 50% tariffs imposed by the U.S., are exclusively on merchandise and not services.

Have the tariffs not had any effect?

Data show that India’s exports to the U.S. have indeed taken a hit due to the tariffs imposed by U.S. President Donald Trump. India’s merchandise exports to the U.S. shrank 20.4% in September 2025 — the first full month when the tariffs were applicable — as compared to their levels in August. In fact, exports to the U.S. have been shrinking since June 2025.

October 2025 bucked this trend, with India’s exports to the U.S again growing 15.4% over their level in September. Government officials and exporter bodies have said this is because Indian exporters have tried to retain their American customers by offering discounts. Further, they have also tried to diversify their customer base within the U.S.

However, the fact remains that 50% tariffs are too strong a headwind for Indian exporters to contend with for too long. It is important to note that, although October’s exports to the U.S. were higher than in September, they were 8.6% lower than in October last year.

Which sectors have been impacted the most?

Several labour-intensive sectors saw their exports contract significantly in October 2025 — leather and leather products by 15.7%, gems and jewellery by 29.5%, organic and inorganic chemicals by 21%, engineering goods by 16.7%, cotton yarn by 13.3%, man-made yarn by 11.8%, and jute by 27.8%, to name a few.

The U.S. is a big importer of almost all of these items, and so the tariffs have impacted these sectors significantly. Exporters are looking to diversify their markets and expand to other countries, but supply chains take time to establish and so this pain will be felt for some more months.

Why did imports surge in October?

India’s total imports jumped nearly 15% to $94.7 billion in October 2025. Within this, services imports grew by a relatively small 8.1%. Merchandise imports, on the other hand, grew by 16.7% in October 2025. So, why did merchandise imports jump in October? The main drivers of this surge were gold and, to an extent, silver. Gold imports jumped nearly 200% in October 2025 to $14.7 billion from $4.9 billion in October 2024.

In fact, gold imports in October reversed the trend that had been seen in the April-September period of this financial year. The value of gold imports in the April-September 2025 period was 8.7% lower than in the same period of the previous year, despite gold prices having increased by more than 22% in this period compared to April-September 2024. However, the jump in October was so significant that it meant that gold imports in April-October 2025 were 21.4% higher than in April-October 2024.

Gold imports jumped because, this year, the festival period fell entirely in October. India’s cultural affinity for gold is such that, come Dhanteras and Deepawali, Indians flock to the markets to buy gold in jewellery form as well as bars and coins, with little regard for the price.

Silver imports, too, grew nearly 530% in October 2025 to $2.7 billion, albeit over a much smaller base than gold.

Was October a blip?

There are several ways to approach this question. On the exports side, it looks like merchandise exports are going to continue to feel some pressure as long as the 50% tariffs are in place. However, trade tensions between India and the U.S. have recently begun receding, with both sides having concluded the sixth round of formal negotiations on a Bilateral Trade Agreement (BTA) in October.

Officials on both sides have again begun talking about concluding at least the first tranche of the BTA soon. Such mentions had stopped in the immediate aftermath of the 50% tariffs, so a resumption of such sentiments should be seen as a good sign. If the tariff issue is handled in this initial deal, then India’s merchandise exports could again start growing strongly.

On the import side, it is unlikely that the months ahead will see gold and silver imports maintain the high level that October saw. However, there are indications that Indian investors are using gold as a hedge against currency risk, so there is a chance that gold imports might remain elevated, even if not by quite as much.

What does the forecast look like?

The Export Import Bank of India (Exim Bank) recently forecast that India’s merchandise exports will touch $114.2 billion in the October-December 2025 quarter, which would be a year-on-year growth of 5%.

Published – November 23, 2025 01:29 am IST

While exports have shrank in the past two months, imports have not — they grew 7.5% over last July and 3.3% in August. 
| Photo Credit: Getty Images/iStockphoto

The story so far: After a positive start to goods exports in the first quarter of 2024-25, there has been a blip in momentum. Outbound shipment values shrank 1.5% in July to an eight-month low, and the contraction deepened to 9.3% in August. This has coincided with a record import bill which hit $64.4 billion in August, and translated into a merchandise trade deficit of $29.7 billion, the second highest after the record $29.9 billion gap in October 2023

What has triggered the wider trade deficit?

While exports have shrank in the past two months, imports have not — they grew 7.5% over last July and 3.3% in August. This lifted the deficit to a nine-month peak of $23.5 billion in July and that gap widened by around $6.2 billion last month. On the exports front, 18 of India’s top 30 segments recorded growth in July and 19 in August, but the big-ticket sectors like petroleum, and gems and jewellery, have tanked significantly. Oil exports were down 22.2% in July and 37.6% in August, while jewellery exports have dropped well over 20% in both months. In August, growth also slowed significantly in sectors like drugs and pharmaceuticals, and the emerging export growth engine of recent times, electronic goods. With the Chinese economy slowing, some segments like stone, plaster, cement, and iron ore, also retreated. Interestingly, as oil prices declined about $6 a barrel in August, India’s oil import bill dropped by almost a third to $11 billion, bringing the petroleum deficit to a three-year low, QuantEco Research economists pointed out in a note.

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“The widening of the merchandise trade deficit was predominantly led by gems and jewellery, along with a minor impact from miscellaneous products and electronic items,” they said. While gems and jewellery exports slipped below $2 billion, India’s gold imports more than doubled in August to an all-time high of $10.1 billion. This is in sharp contrast to a 10.7% drop in gold imports in July and the range of $3 billion-3.4 billion seen since April. Top trade officials attributed this surge to the reduction in gold import duty from 15% to 6% announced in the Budget, the recent rise in gold prices, and domestic jewellery players stocking up for the festive season. Economists believe the full impact of the duty cuts announced on gold and other items will continue to play out, weighing on the import bill in coming months.

Could wider trade deficits pose a risk?

There is no significant risk to the economy at this point. As Commerce Secretary Sunil Barthwal has emphasised, India is growing faster than the world, so its demand for global products is bound to outpace the world’s demand for its exports. “The deficit should not be a matter of concern for a developing economy with high growth and to the extent there are no foreign exchange issues, it should not matter,” he asserted this week. Foreign capital inflows have stayed positive in recent months, and India’s foreign exchange reserves had reached a record high of $675 billion as of August 2, which the Finance Ministry reckoned last month to be sufficient to cover 11.6 months of imports. That cover may be a tad lower if imports continue to hover over $60 billion in coming months, but services exports, reckoned to have risen over 10% between April and August, provide some comfort.

What about foreign trade in goods?

Global trade is expected to grow faster in 2024 than 2023, but for now, demand remains tepid in most developed markets. The festering geopolitical risks and conflicts aside, the upcoming election in the U.S. and its tariff hikes on Chinese goods even as Beijing grapples with a faltering domestic economy, presents a double-edged sword for players like India. While China’s demand for imports slip, it has more reason to dump its products in non-U.S. markets at throwaway prices. Moreover, this interplay of downward pressures is expected to keep oil prices low, hurting India’s oil export hopes, even as concerns about overall global demand impulses have increased. Beyond the short term, the road ahead for India’s trade — the government aims to scale up services and goods exports to a trillion dollars each by 2030 — is not likely to be smooth.

There are challenges to boosting the export growth engine, Chief Economic Adviser V. Anantha Nageswaran said, with the global economy slowing down, tariffs and non-tariff barriers proliferating with countries adopting “active industrial policies” since the pandemic, and new trade walls such as the European Union’s Carbon Border Adjustment Mechanism and Deforestation Rules coming into play. There could be a year or two that offer the chance to ramp up exports, but all in all, it’s going to be a hard time, he concluded.