Indian Trade Deficit Holds Despite Volatile Energy

The merchandise trade deficit in India was at $26.86 billion in August of 2026, remaining stable when compared to the $26.68 billion in the corresponding period of the previous year despite the turbulent macroeconomic backdrop in the September quarter. Imports rose by 14.7% annually to $70.67 billion, lifted by soaring energy costs that Indian importers face as the war in the Middle East and capacity cuts for Russian refiners hampered supply from importers. Meanwhile, exports rose by 25.5% to $43.81 billion.

India’s trade deficit widened to $31.98 billion in July 2026, up from $27.5 billion in the same month of the previous year and surpassing market forecasts of $30.2 billion. It was the largest trade shortfall since January, as imports surged by 17.5% annually to an all-time high of $76.2 billion, partly reflecting higher oil, fuel, and coal prices amid fresh hostilities in the Middle East. Moreover, edible oil imports hit a 10-month high in July as refiners stocked up ahead of the August-November festival season, when demand usually peaks. Exports also advanced by a robust 19.6% to $44.2 billion, amid increased shipments of petroleum products, electronics, engineering goods, gems and jewellery, iron ore, meat, dairy and poultry products, and marine products.

The Indian goods trade deficit widened to $30.43 billion in June of 2026 from $19.12 in the corresponding period of the previous year, above market expectations of a $26.5 billion gap. It was the widest deficit since January and the largest on record for the month of June. Imports surged by 31% to $70.84 billion, also the highest on record for the month, as the war in the Middle East and US tariffs aimed at preventing India from importing Russian oil lifted the price that India must pay for foreign energy. Imports rose despite the continuous pressure on the Indian rupee, which prevents a higher volume of foreign purchases. Meanwhile, exports rose by a softer 15.5% to $40.4 billion. Exports to the US were likely high, as the current trade deal between the US and India expires in July and risks higher levies for domestic manufacturers.