Goods trade deficit narrows on sharp decline in imports

Exports rose, driven by higher demand for engineering goods, electronics, and pharma

- Dhirendra Kumar & Rhik Kundu

India’s merchandise trade deficit narrowed to $26.49 billion in August, from $27.35 billion in the previous month, provisional data released by the commerce ministry on Monday showed.

Merchandise trade deficit in August was higher than economists’ forecast of $25.13 billion in a Reuters poll.

Exports rose in the run-up to the hiked US tariffs that took effect late August. The rise in exports was driven by higher demand for engineering and electronic goods and drugs & pharma, among other products.

In August, US President Donald Trump announced an additional 25% tariff on Indian goods citing New Delhi’s continued energy trade with Russia. This took the total duty on Indian exports to 50%, among the highest in the world. About half of India’s exports to the US could be hit by this move. Exports to the US equal about 2% of India’s GDP.

Merchandise exports fell sequentially to $35.10 billion in August from $37.24 billion in July, while imports fell more sharply to $61.59 billion from $64.59 billion during the same period. On an annualised basis, exports saw a 6.7% rise, while imports fell 10.1% from a year ago.