Gold spike, Trump tariffs lift trade deficit to record

India's goods trade deficit ballooned to an all-time high in October, driven by a surge in gold imports and the growing impact of punitive US tariffs.

- Dhirendra Kumar & Rhik Kundu

The trade gap widened sharply to $41.68 billion last month, jumping from $32.15 billion in September and $26.2 billion a year earlier, provisional data released by the commerce ministry showed. The reading significantly exceeded expectations, coming in far wider than the $28.8 billion deficit projected by a Reuters poll.

Gold was the villain of the piece: Imports tripled to $14.7 billion in October from $4.9 billion a year earlier. Gold has gained 64% in just a year, driven by global economic uncertainty, geopolitical tensions, and central bank buying.

"The increase in gold imports has been phenomenal despite very high global prices," commerce secretary Rajesh Agarwal told reporters, noting this was one of two primary drivers behind the widening deficit.

The other culprit was stiff US tariffs of 50% on a range of Indian goods, which hit demand in the country's biggest export market. Exports to the US stood at $6.3 billion, up from the previous month's $5.8 billion, but lower than the previous year's $6.9 billion. Commerce secretary Agarwal termed the month-on-month increase in exports to US a "silver lining."

Overall merchandise exports slipped to $34.38 billion from $36.38 billion in September and $38.98 billion a year earlier. Agarwal said India maintained steady export growth in the first seven months of FY25, even as global demand softened.