India’s trade deficit shrinks sharply in Feb—US tariff risks remain in focus

India’s trade deficit saw a sharp decline in February, narrowing to $14.05 billion from $22.9 billion in January, driven primarily by lower imports. The drop comes as the government navigates global trade challenges, with efforts underway to boost export growth.

The estimated trade surplus for February 2025 was $4.43 billion, reflecting a steady performance in key sectors despite global uncertainties.

Merchandise exports in February stood at $36.91 billion, showing a modest rise from $36.43 billion in January. However, imports fell significantly to $50.96 billion from $59.42 billion in the previous month, helping to reduce the deficit. Petroleum imports totalled $11.8 billion, while gold imports stood at $2.3 billion.

On the services front, exports declined to $35.03 billion in February from $38.55 billion in January, while imports slipped to $16.55 billion from $18.22 billion.

For the financial year so far, non-petroleum merchandise exports have grown 6.43%. However, between April 2024 and February 2025, overall merchandise exports saw only a marginal year-on-year increase of 0.06%, while imports rose 5.71%.

This has pushed the cumulative trade deficit for the period 16.86% higher than the previous year.

The Commerce Ministry acknowledged the challenges India has faced in global trade but expressed confidence in surpassing $800 billion in total exports this fiscal year, up from $778 billion last year.

While the gems and jewellery sector has struggled, coffee exports have shown exceptional growth, and non-petroleum trade remains a strong pillar, expanding at 6%.

Meanwhile, India continues to push forward with international trade negotiations. The 10th round of India-EU free trade agreement talks concluded on 14 March in Brussels, while discussions with the US focused on increasing bilateral trade to $500 billion by 2030.

Commerce Minister Piyush Goyal held meetings with US officials earlier this month to explore opportunities and assess the potential impact of new US tariffs.

The US is pursuing reciprocal tariffs on a global scale, not just against India, as it seeks to address trade imbalances with multiple countries. India is actively engaging with the US to strengthen economic ties, aiming to significantly boost bilateral trade and explore a mutually beneficial trade agreement.