India’s Trade Deficit Hits 13-Month High as Exports Rise Modestly Despite US Slowdown

India’s trade data for September reveals a complex picture: while total goods exports grew 6.74% to $36.38 billion, exports to the United States dropped sharply by 12%, reflecting the ongoing impact of American tariffs. At the same time, surging imports of gold, silver, and fertilisers pushed the trade deficit to $31.15 billion, the highest in over a year, according to the Ministry of Commerce and Industry.

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Export Performance: Gains Amid Challenges

Despite the slowdown in US shipments, Indian exporters saw robust growth in other markets:

• UAE: Exports rose 24.33%, totaling a significant share of India’s Middle East trade.

• China: Exports surged 34.18%, driven largely by iron ore and electronics.

Commodity-wise trends highlight a mixed performance:

• Textiles, jute, carpets, and handicrafts saw a decline of 5–13%, reflecting pressure on labour-intensive sectors.

• Electronic goods exports jumped 58%, while iron ore shipments to China increased 60%, offsetting some of the losses in traditional sectors.

Services exports, however, dipped 5% to $30.82 billion, compared to $32.60 billion in the same month last year.

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Imports Surge: Precious Metals and Fertilisers Drive Deficit

The sharp rise in India’s trade deficit was largely due to increased purchases of high-value commodities:

• Gold imports more than doubled, hitting $9.6 billion (up 106.93%).

• Fertiliser imports rose 202% to $2.3 billion, reflecting domestic demand pressures.

• Petroleum product imports fell slightly by 5.85% to $14.03 billion, while imports from the US grew 11.78%, and imports from Russia declined 16.69%.

Commerce Secretary Rajesh Agrawal noted that the supply chain turbulence over the past year had been “managed at cost,” and highlighted that the impact of US tariffs on exports would be clearer in September and October once commodity-wise data is fully analysed.

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Energy Strategy and US Engagement

Agrawal also addressed India’s energy imports, noting potential room to increase purchases from the US. Crude oil imports from the US have fallen from $25 billion to about $12–13 billion over the last seven to eight years. “There is headroom of around $12–15 billion, which we can purchase without worrying about the configuration of refineries,” he said.

Negotiations between Indian officials and US counterparts are ongoing, with a focus on diversifying India’s energy portfolio. Agrawal emphasised that the current discussions are exploratory, not formal, due to the ongoing US government shutdown.

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Outlook

While exports continue to expand in non-US markets, rising imports of precious metals and fertilisers have created a structural pressure on India’s trade balance. Analysts suggest that stabilising the deficit will require a combination of commodity price management, export diversification, and strategic energy sourcing.