India’s Trade Deficit Smaller than Expected in March

India’s trade deficit shrank to $20.67 billion in March 2026, down from $27.1 billion in February and $21.69 billion a year earlier. This figure was significantly below market expectations of $32.75 billion, marking the smallest trade gap since June 2025. The improvement came as exports rose to $38.92 billion, up from $36.61 billion in February, while imports fell to $59.59 billion, down from $63.71 billion. However, the outlook remains uncertain due to escalating geopolitical tensions in West Asia. The US military recently halted maritime trade linked to Iran, though President Donald Trump suggested that negotiations with Tehran could resume. Unlike export-driven economies such as Japan, South Korea, and Taiwan, India’s heavy reliance on Gulf shipping routes makes it particularly vulnerable to disruptions and rising costs from the ongoing conflict.

India’s merchandise trade deficit widened to $27.10 billion in February 2026, nearly doubling from $14.42 billion a year earlier but slightly below market expectations of $28.0 billion. Imports jumped 24% year-on-year to $63.71 billion, driven by purchases of gold and silver, while exports fell 0.8% to $36.61 billion. In late February, the US imposed a temporary 10% tariff on Indian goods alongside standard MFN rates, following a Supreme Court ruling that struck down earlier higher tariffs. The widening deficit also reflects rising freight costs and supply disruptions in West Asia. Exporters in sectors such as apparel and manufacturing have begun adjusting shipment schedules and exploring alternative routes to manage higher logistics costs and longer shipping times. While the latest data does not yet capture the full impact of geopolitical tensions in the Gulf, rising insurance premiums and shipping disruptions are expected to influence trade flows in the coming months.

India’s merchandise trade deficit surged to $34.68 billion in January 2026, up from $23.43 billion a year earlier and well above market expectations of $26 billion. The gap was the largest since October’s record $41.68 billion, coming just weeks before New Delhi struck an interim trade deal with the US aimed at lowering tariffs. Imports jumped 19.2% year-on-year to $71.24 billion, driven largely by higher purchases of gold and silver, while exports rose only 0.6% to $36.56 billion. Earlier this month, US President Donald Trump announced a reduction in tariffs on Indian goods to 18% from 50%, offering relief to exporters and policymakers. Under the agreement, India has committed to reducing Russian oil imports and plans to more than double its annual purchases of US goods. The deal followed a trade pact with the EU, reflecting India’s broader push to strengthen trade ties with major global partners.