India’s Trade Deficit Narrows to $26.49B in August
India’s merchandise trade deficit eased in August 2025 to US$ 26.49 billion, showing an improvement compared to US$ 27.35 billion in July. The narrowing gap came despite both exports and imports recording a decline, highlighting the slowdown in global trade activity as well as domestic demand pressures.
Exports & Imports Decline
Exports in August fell to US$ 35.10 billion, lower than July’s US$ 37.24 billion. The fall was partly due to weaker global demand and the impact of new tariffs imposed by the United States on certain Indian goods. Imports, however, contracted more sharply to US$ 61.59 billion, down from US$ 64.59 billion in July. The decline in imports was attributed to lower purchases of crude oil, gold, and electronic goods, which significantly reduced India’s overall import bill.
Key Drivers & Context
The slight relief in the deficit was mainly because imports contracted at a faster pace than exports. Analysts point out that the introduction of fresh U.S. tariff hikes effective August 27 had a visible impact on India’s export performance, particularly in sectors such as textiles, engineering goods, and chemicals. At the same time, subdued oil prices and cautious consumer demand contributed to lower import volumes.
Impact on Goods & Services Trade
When goods and services are combined, India registered an overall trade deficit of US$ 9.88 billion in August. This reflects the growing role of India’s services sector, particularly IT and business outsourcing, in offsetting merchandise trade pressures. Economists say that while the narrowing gap provides temporary relief, sustained export competitiveness and policy adjustments will be crucial to manage the trade balance going forward.
