India Trade Deficit Widens in December

India will cut tariffs on European Union car imports to 40% from levels as high as 110%, Reuters reported. Prime Minister Narendra Modi’s government has agreed to immediately lower duties on select vehicles priced above EUR 15,000, with rates set to fall further to 10% over time, easing entry for automakers like Volkswagen, Mercedes-Benz and BMW. The move comes as India and the EU prepare to announce the conclusion of long-running free trade negotiations on Tuesday, with officials calling it “the mother of all deals.” Once finalized and ratified, the agreement is expected to expand bilateral trade and boost Indian exports of goods such as textiles and jewellery, which have faced 50% U.S. tariffs since late August.

The merchandise trade balance in India widened to $25 billion in December of 2025 from $20.6 billion in the corresponding period of the previous year, marking the sharpest trade gap for the month on record. Imports rose by 8.8% from the previous year to $63.6 billion despite a week rupee and the decline in global energy benchmarks in the period, which make up a large portion of Indian imports, although pressure from the US to temper Indian purchases of Russian oil likely increased the energy input costs for refiners. In the meantime, exports grew a softer 1.8% to $38.5 billion. Foreign sales for selected industries were under pressure from 50% tariffs by the US, with India among the only major economies that have not secured a trade deal with the White House.

India’s trade deficit narrowed to USD 24.53 billion in November 2025 from USD 31.92 billion in the same month last year, according to preliminary estimates. This marked the smallest trade gap in five months, as exports surged 19.37% year-on-year to a six-month high of USD 38.13 billion, supported by government measures, including export incentives aimed at mitigating the economic impact of the 50% US tariffs imposed at the end of August. Exports to the US rose by USD 1.3 billion in November despite the tariffs, while shipments to China increased by USD 1 billion, with Spain, the UAE, and Tanzania also recording solid gains. Meanwhile, imports fell 1.88% to USD 62.66 billion, largely due to a sharp drop of around 60% in gold imports, alongside declines in oil and coal shipments. On a cumulative basis, exports increased 2.62% to USD 292.07 billion during April–November, while imports rose 5.59% to USD 515.21 billion over the same period a year earlier.