Syllabus: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
Context
- India’s trade deficit widened sharply by 141% in October 2025 to $21.8 billion.
- Exports weakened marginally while imports—especially gold and silver—surged significantly.
Trade Balance Overview
- Trade deficit reflects imports exceeding exports.
- October 2025 deficit rose to $21.8 billion, up from $9.05 billion a year earlier.
- Both shrinking exports and rising imports contributed to the widening gap.
- Merchandise trade was the primary driver; services trade remained strong.
Export Performance
- Total exports fell 0.7% to $72.9 billion.
- Merchandise exports declined 11.8% to $34.4 billion.
- Services exports grew 11.9%, supporting overall stability.
- April–October 2025: total exports grew 4.8%, merchandise 0.6%, services 9.75%.
- India also recorded highest-ever quarterly exports in Q1 and Q2 due to strong services.
Impact of U.S. Tariffs
- U.S. imposed 50% tariffs on several Indian goods.
- India’s merchandise exports to U.S. shrank 20.4% in September 2025, continuing a downward trend since June.
- October showed a temporary rise of 15.4% as exporters offered discounts and diversified clients.
- However, October exports remained 8.6% lower year-on-year.
- Labour-intensive sectors—leather, textiles, gems & jewellery, chemicals, engineering goods—were hit hardest.
Why Did Imports Surge?
- Total imports rose 15% to $94.7 billion.
- Merchandise imports grew 16.7%; services imports rose 8.1%.
- Gold imports surged nearly 200% to $14.7 billion as festival season fell entirely in October.
- Silver imports rose 530%, though from a smaller base.
- October’s spike reversed earlier declines; April–October gold imports became 21.4% higher year-on-year.
Outlook
- Merchandise exports may remain pressured while tariffs persist.
- India–U.S. Bilateral Trade Agreement (BTA) talks revived, offering hope for tariff resolution.
- Gold and silver imports unlikely to stay at October’s peak, though gold demand may remain elevated as a hedge.
- Exim Bank projects 5% growth in merchandise exports in Q3 (Oct–Dec 2025), reaching $114.2 billion.