India’s merchandise trade deficit narrowed to $20.67 billion in March as the decline in imports from a year ago was sharper than the fall in exports. However, higher imports of energy, gold and electronics continued to weigh on the overall trade balance at the close of FY26.
The West Asia war has kept freight costs elevated and injected fresh uncertainty into global trade flows.
The gap between merchandise imports and exports was less than $21.69 billion in March 2025, according to provisional estimates released by the ministry of commerce and industry on Wednesday.
Merchandise exports in March 2026 were estimated at $38.92 billion, down from $42.05 billion in the same month a year ago. Imports declined more sharply to $59.59 billion from $63.74 billion a year earlier, helping narrow the trade deficit.
“Amidst a sharp YoY dip in oil imports following the West Asia crisis, India’s merchandise trade deficit eased to $20.7 billion in March 2026 from $21.7 billion in the year-ago month, after having displayed a steep increase in January-February 2026. This would provide some respite to the current account balance in Q4 FY2026, which would nevertheless likely witness a deficit to the tune of ~0.6% of GDP in the quarter, in contrast with the typical seasonal surplus that is seen during the last quarter of the fiscal,” said Aditi Nayar, chief economist of Icra.
Including services, India’s overall trade deficit eased to $2.44 billion in March 2026 from $3.55 billion in March 2025. Overall exports stood at $74.11 billion, compared with $77.67 billion a year ago, while imports fell to $76.55 billion from $81.22 billion.
Services exports were estimated at $35.20 billion in March, marginally lower than $35.63 billion a year earlier. Services imports declined to $16.96 billion from $17.48 billion, helping cushion the merchandise trade gap.
Gaura Sengupta, chief economist at IDFC First Bank, said that trade deficit was lower than expected with month-on-month decline in imports. “Crude oil imports were flat in value terms as these were based on contracts which were made before the West Asia crisis The impact of surge in crude oil prices will be visible in April data. However, it’s also likely that the volume of imports would have reduced. Gold imports were also lower, reflecting reduction in prices,” she said.
For the full financial year 2025-26, India’s merchandise exports rose to $441.78 billion from $437.70 billion in the previous year, while imports increased to $774.98 billion from $721.20 billion, taking the annual merchandise trade deficit to $333.20 billion.
Ajay Srivastava, founder of Global Trade Research Initiative (GTRI), said that services exports are likely to surpass merchandise exports next year.
“India’s services exports could surpass merchandise exports as early as next fiscal year if current trends continue. In FY 2025–26, merchandise exports were $441.8 billion, only modestly ahead of services exports at $418.3 billion. But while goods exports grew just 0.9%, services exports expanded 7.9%. At that pace, services exports would rise to about $451.5 billion in FY 2026–27, overtaking projected merchandise exports of $445.9 billion and becoming India’s largest export category,” Srivastava said.
This shift would underline the growing importance of India’s IT and business-services sector—but also its vulnerability. With AI beginning to disrupt traditional outsourcing and software services models, India needs a national strategy to transform its IT industry, move up the value chain, and build new strengths in advanced digital and business services, he added.
India’s gold import bill rose sharply to $71.98 billion in FY26, from $58 billion in 2024–25. However, this rise was not driven by higher volumes, as gold imports in quantity terms actually declined from 757.09 tonnes to 721.03 tonnes . The increase in the overall import bill was entirely due to a surge in prices, with the unit value of gold rising significantly from $76,617.48 per kg to $99,825.38 per kg.
