India’s merchandise trade deficit dropped to a three-and-a-half-year low of US$ 14.05 billion in February 2025, due to a sharp fall in imports, especially oil and gold. Imports declined 16.3% to US$ 50.96 billion, while exports fell 10.9% to US$ 36.91 billion. During the month, India saw a sharp decline in imports of gold, petroleum, and silver, along with major drops in pearls, coal, and iron & steel. On the export front, petroleum products, chemicals, and gems & jewellery witnessed notable declines. However, exports of tobacco, electronic goods, minerals, coffee, and rice saw strong growth. India’s services exports surged 23.6% year-on-year to an estimated US$ 35.03 billion in February, while services imports declined by 8.67% to US$ 16.55 billion.
India’s merchandise trade deficit fell sharply to a three-and-a-half-year low of US$ 14.05 billion in February, as both exports and imports contracted significantly. This steep decline was largely attributed to falling global petroleum prices and growing economic uncertainty, compounded by restrictive trade measures introduced by the United States.
The Commerce Ministry noted that February’s trade deficit was the lowest since August 2021, attributing the improvement to a sharp decline in imports, while exports remained relatively stable. As per data from the Ministry of Commerce and Industry, India’s merchandise trade deficit — the gap between imports and exports — was US$ 22.9 billion in January 2025. It stood at US$ 19.5 billion in February 2024.
Merchandise imports and exports decline in February
The data released on Monday (17 March) showed that India’s Imports declined sharply, falling 16.3% to US$ 50.96 billion — the biggest drop in 20 months and the first in nearly a year. The decline was primarily driven by a 29.6% slump in oil imports, while gold imports plunged 62%.
Gold imports dropped significantly from US$ 6.15 billion in February 2024 to US$ 2.34 billion in February 2025. The petroleum import bill also saw a steep decline of 29.5%, falling to US$ 11.9 billion, compared to US$ 16.9 billion in the same month last year. Silver imports plunged to US$ 430 million, down from US$ 1.7 billion a year earlier. Other major declines were observed in the imports of:
- Pearls, precious and semi-precious stones: down 41.61%
- Coal, coke, and briquettes: down 35.63%
- Iron and steel: down 23.37%
As per the data, exports dropped by 10.9% year-on-year to US$ 36.91 billion in February — the steepest contraction in 20 months. The Officials noted that part of this decline was due to a high base effect, with exports totaling US$ 41.4 billion during the same month last year.
Exports excluding petroleum and gems & jewellery — considered a better reflection of export strength — fell nearly 5% to US$ 28.57 billion in February. Key sectors that reported declines, include:
- Gems and jewellery: -20.7%
- Drugs and pharmaceuticals: -1.5%
- Organic and inorganic chemicals: -24.5%
- Petroleum products: -29.2%
- Engineering goods: -8.6%
However, there were gains in:
- Tobacco: +26.76%
- Electronic goods: +26.46%
- Mica, Coal & Other Ores, Minerals Including Processed Minerals: +24.25%
- Coffee: +22.32%
- Rice: +13.21%
- Readymade garments: + 3.97%
Cumulatively, during April to February of the current fiscal year, merchandise exports stood at US$ 395.63 billion, slightly up from US$ 395.38 billion in the same period of 2023–24. Imports, on the other hand, increased to US$ 656.68 billion, compared to US$ 621.19 billion in the previous year. Consequently, the merchandise trade deficit widened to US$ 261.06 billion in April–February 2024–25, up from US$ 225.81 billion recorded during the same period last fiscal. (India’s export decline, however, contrasts with trends in other emerging economies. China’s exports grew 7.1% in January-February 2025, while Vietnam posted an 8.4% increase over the same period.)
FIEO President Ashwani Kumar attributed the steep decline in goods exports to subdued global demand and persistent challenges in key sectors, further intensified by the ongoing global tariff war. While acknowledging the pressure on Indian exporters due to the tariff-driven trade environment, he noted that the decline in imports reflects reduced demand for foreign goods, which could present new opportunities for the growth of domestic industries. He urged the government to roll out targeted measures to support exporters, such as expanding the Production-Linked Incentive (PLI) scheme and ensuring better access to competitive financing.
Mr. Kumar also stressed the importance of tackling non-tariff barriers, improving market access, and strengthening India’s participation in global value chains to secure long-term export growth.
Services exports witnessed robust growth
In contrast to the merchandise segment, services exports surged by 23.6% to US$ 35.03 billion, while services imports rose 8.6% to US$ 16.55 billion, resulting in a robust services trade surplus of US$ 18.5 billion. India posted an overall trade surplus of US$ 4.43 billion last month, based on combined estimates of goods and services trade. It is important to note that this data is provisional and will be updated following the Reserve Bank of India’s official release.
US-tariff impact
Amidst global headwinds, Commerce Secretary Sunil Barthwal expressed confidence that India is still on course to achieve US$ 800 billion in total exports of goods and services in FY25, compared to US$ 778 billion in the previous year.
The export outlook remains murky, with concerns mounting over retaliatory tariffs the US plans to implement from April 2. The US has already imposed a 25% duty on steel and aluminium imports, and Indian exporters report that American buyers are delaying orders, anticipating further tariff hikes. However, amidst concerns over potential reciprocal tariffs from the U.S. government, Indian exports to the United States have continued to grow, rising 10.4% to US$ 7.9 billion in February and 9.1% during the April–February period, with total shipments valued at US$ 76.4 billion.
