NEW DELHI: India’s merchandise trade deficit narrowed to $27.1 billion in February as imports moderated from the previous month, though elevated purchases of energy, gold and electronics continued to weigh on the overall trade balance even as geopolitical tensions in West Asia pushed up freight costs and added uncertainty to global trade flows.
The gap between imports and exports was lower than $34.68 billion in January, but still higher than $25.04 billion in December 2025 and $14.42 billion a year earlier, according to provisional data released by the ministry of commerce and industry on Monday. The widest trade deficit this fiscal was recorded at $41.68 billion in October 2025.
Merchandise exports increased marginally to $36.61 billion from $36.56 billion in January but were lower than the $38.51 billion in December and slightly below $36.91 billion in February last year.
“India’s exports continue to show resilience despite growing geopolitical uncertainties and logistics disruptions in key global shipping routes,” said Ajay Sahai, director general of the Federation of Indian Export Organisations (FIEO). “While the Middle East tensions emerged only at the end of February and are not yet reflected in the data, exporters are closely monitoring their impact on freight costs and transit times.”
Encouragingly, strong services exports and diversified markets continue to support overall export momentum. With stable policy support and smoother logistics, India’s export sector remains cautiously optimistic, Sahai added.
Imports drop
Imports contracted to $63.71 billion in February from $71.24 billion in January. However, imports were significantly higher than $51.33 billion recorded in February 2025, indicating continued strength in domestic demand for commodities and industrial inputs.
Imports of petroleum and crude products ($12.96 billion), gold ($7.45 billion), electronics goods ($10.08 billion) and machinery ($5.32 billion) contributed to the trade deficit. Merchandise exports were driven by electronic goods, meat, dairy and poultry products, drugs and pharmaceuticals, engineering goods and marine products.
The US ranked first among the top destinations for India’s goods exports, followed by the UAE, China, the Netherlands and the UK. On the import side, China remained India’s largest sourcing partner, followed by the UAE, Russia and the US.
Exports to the US rose marginally to $6.83 billion in February from $6.58 billion in January, though they remained lower than the $7.01 billion recorded in December. However, cumulative shipments during April-February increased 3.8% to $79.29 billion from $76.36 billion in the same period of the previous fiscal.
Trade deal
Early in February, the US imposed a 10% universal tariff under Section 122 of the Trade Act of 1974 and launched Section 301 investigations against almost 60 countries, including India, as part of its broader review of global trade practices.
Asked about when the India-US trade deal would be signed, commerce secretary Rajesh Agrawal said: “The actual signing of the India-US trade deal will happen once the new global architecture of US tariffs is in place. Once the US is on the path to create a tariff architecture at the global level, we will take a call on the trade deal.”
The commerce ministry recently said that both sides remain engaged for a mutually beneficial trade agreement. Goods trade between India and the US stood at $127.7 billion during April-February, with India recording a trade surplus of $30.88 billion. This compares with bilateral trade of $118.22 billion in the corresponding period of the previous fiscal, when the trade surplus stood at $34.5 billion. The trade surplus with the US has contracted by $3.62 billion from the previous fiscal.
China dependence
Bilateral trade between India and China also increased last month, with imports rising sharply alongside exports, reflecting continued dependence on Chinese intermediate and electronic goods.
India’s goods shipments to China moderated to $1.66 billion in February, compared with $1.63 billion in January, and down from $2.05 billion in December and $2.20 billion in November. Merchandise trade with China reached $137.1 billion in the April-February period of the current fiscal, with a trade deficit of $102.02 billion. Exports to China climbed to $17.54 billion, up from $12.74 billion a year earlier.
India’s total merchandise exports during April-February rose to $402.93 billion, up from $395.66 billion a year ago. Imports increased to $713.53 billion during the first 11 months of the current fiscal, leading to a goods trade deficit of $310.6 billion.
The combined merchandise and services trade surplus narrowed year-on-year in February even as services exports remained robust. Total exports (goods and services) rose to $76.13 billion during the month from $68.56 billion a year earlier, while total imports jumped to $80.09 billion from $65.84 billion a year earlier. Services exports rose to $39.53 billion from $31.65 billion a year ago, while services imports increased to $16.38 billion from $14.51 billion a year ago.
Sector-wise performance
Engineering goods continued to anchor India’s export basket during April-February, with shipments rising to $111 billion from $105.94 billion in the same period last year.
“The engineering exports sector cannot remain insulated from the happenings in West Asia and the Middle East,” said Pankaj Chadha, chairman of the Engineering Export Promotion Council. “The UAE and Saudi Arabia are our second- and third-biggest export markets, respectively, after the US. The ongoing conflict is expected to also take a toll on our exports to West Asia and North Africa, considering the UAE and Saudi Arabia are gateways to those markets.”
Electronic goods exports recorded strong growth, increasing to $43.56 billion from $34 billion, while drugs and pharmaceuticals exports rose to $28.29 billion from $26.79 billion, reflecting steady demand in key markets.
In contrast, petroleum product exports declined to $48.81 billion during the period from $58.49 billion a year earlier.
Among traditional labour-intensive sectors, ready-made garments of all textiles rose marginally to $14.53 billion from $14.46 billion, while marine product exports increased to $7.75 billion from $6.73 billion.
However, rice exports moderated to $10.54 billion from $11.29 billion. Gems and jewellery exports edged lower to $26.16 billion, compared with $26.92 billion a year earlier.
On the import side, petroleum, crude oil and products remained the largest import item, even though it decreased to $161.78 billion in April-February from $166.77 billion in the same period last year. Imports of electronic goods surged to $104.92 billion from $89.23 billion, while gold imports increased sharply to $68.91 billion from $53.53 billion.
Among other key imports, machinery, electrical and non-electrical equipment imports rose to $56.07 billion from $48.75 billion, while non-ferrous metal imports increased to $26.54 billion from $22.68 billion, reflecting sustained demand for industrial inputs.
Volatile gold imports
Gold imports emerged as the central driver of volatility in India’s trade deficit, with recent data indicating that rising global prices — rather than higher consumption volumes — are inflating the import bill.
Gold imports recorded a 20.06% increase to $61.46 in value terms during April-January from $51.19 billion in the corresponding period of the previous fiscal year. However, the quantity of gold imports declined by about 8% to 621.77 tonnes from 675.85 tonnes a year earlier.
The increase in the import bill was primarily driven by a sharp rise in global gold prices, with the average unit price increasing by 30.51% to $98,852.19 per kg, compared with $75,745.02 per kg during April-January of FY25.
The outsized role of gold in shaping India’s trade deficit became particularly visible in late 2024, when the commerce ministry revised November gold import data downward by $5 billion to $9.84 billion from an initial estimate of $14.8 billion.
Kirit Bhansali, chairman of the Gem and Jewellery Export Promotion Council, said that the past year had been challenging for the global industry due to shifting US tariff policies, geopolitical uncertainties and evolving consumer demand across major markets.
“Despite these headwinds, the Indian gem and jewellery sector has demonstrated remarkable resilience. Exporters have increasingly diversified their markets, strengthening shipments to destinations such as the UAE and Australia, where free trade agreements have helped improve market access, while Hong Kong continues to remain an important trading hub,” Bhansali said.
Silver is the new gold
Silver imports surged during April-January, with the import value rising 128.54% to $9.78 billion from $4.28 billion a year earlier. The sharp increase in the import bill was driven by both higher volumes and rising global prices.
The quantity of silver imports increased 41% to 6,474.57 tonnes, up from 4,581.32 tonnes a year earlier. The average unit price of silver increased 61.71% to $1,509.78 per kg from $933.62 per kg during April-January of FY25.
