India’s Trade Deficit Widens to $21.8 Billion in October 2025
India’s trade deficit surged by 141% to reach $21.8 billion in October 2025, compared to $9.05 billion during the same period last year. While the numbers appear alarming, underlying data reveals a more nuanced picture with exports showing resilience and imports being driven by specific seasonal factors.
Key Takeaways
- Trade deficit expanded to $21.8 billion in October 2025
- Merchandise exports fell 11.8% while services exports grew 11.9%
- Gold imports surged 200% due to festival demand
- US tariffs continue to impact labor-intensive sectors
Understanding the Trade Deficit Surge
A trade deficit occurs when a country’s imports exceed its exports. In October 2025, India experienced both shrinking exports and swelling imports, primarily driven by merchandise trade rather than services.
Export Performance: Mixed Signals
India’s total exports declined by 0.7% to $72.9 billion in October 2025. This was primarily due to an 11.8% contraction in merchandise exports, which fell to $34.4 billion. However, services exports demonstrated strong growth, increasing by 11.9% during the same period.
Commerce Secretary Rajesh Agrawal highlighted during a press briefing that India achieved its highest-ever quarterly exports in both Q1 and Q2, resulting in record export performance for the first half of the financial year.
Impact of US Tariffs
The 50% tariffs imposed by the US have significantly affected India’s merchandise exports. Exports to the US shrank 20.4% in September 2025 – the first full month of tariff implementation. However, October saw a temporary recovery with 15.4% growth over September levels, though exports remained 8.6% lower than October 2024.
Government officials attribute this temporary improvement to Indian exporters offering discounts to retain American customers and diversifying their customer base within the US market.
Most Affected Sectors
Several labor-intensive sectors experienced significant export contractions in October 2025:
- Gems and jewellery: -29.5%
- Jute: -27.8%
- Organic and inorganic chemicals: -21%
- Engineering goods: -16.7%
- Leather and leather products: -15.7%
- Cotton yarn: -13.3%
- Man-made yarn: -11.8%
Import Surge Driven by Gold and Silver
India’s total imports jumped nearly 15% to $94.7 billion in October 2025. The primary drivers were precious metals, with gold imports surging 200% to $14.7 billion and silver imports growing 530% to $2.7 billion.
This surge was largely attributed to the festival season, with Dhanteras and Deepawali falling entirely in October, driving traditional gold purchases despite higher prices.
Future Outlook and Trade Negotiations
Trade tensions between India and the US show signs of easing, with both countries concluding the sixth round of formal negotiations on a Bilateral Trade Agreement (BTA) in October. Officials from both sides have resumed discussions about concluding the first phase of the BTA soon.
The Export Import Bank of India forecasts merchandise exports to reach $114.2 billion in the October-December 2025 quarter, representing 5% year-on-year growth.
