India’s merchandise trade deficit expanded to US$ 34.68 billion in January 2026, reaching a three-month high as import growth significantly outpaced exports. The widening gap was mainly due to a sharp spike in gold and silver imports, which pushed up the overall import bill. While merchandise export growth remained modest, sectors such as engineering goods, marine products, iron ore and select agricultural commodities registered solid gains. Electronics exports lost momentum, and labour-intensive industries continued to face weak global demand. Meanwhile, services exports posted strong double-digit growth, boosting total exports to US$80.45 billion and cushioning the trade balance.
Although shipments to the United States declined, increased shipments to China, the UAE and Europe reflected ongoing market diversification, with new trade agreements expected to enhance stability and sustain export growth.
India’s merchandise trade deficit climbed to a three-month high of US$ 34.7 billion in January, driven primarily by a steep increase in gold and silver imports, even as export growth remained subdued amid elevated additional US tariffs. The figure was well above economists’ estimates of about US$ 26 billion, taking markets by surprise. When you compare on a YoY basis, the figure stood at US$23.43 billion for January 2025. Even on a MoM basis, the deficit expanded from US$ 25.04 billion in December, underscoring the impact of surging imports and intensifying pressure on the trade balance.
January’s trade data holds strategic importance, capturing the closing stretch of elevated US tariff measures on Indian exports just as New Delhi and Washington prepare to formalise an interim trade pact expected in March. A joint statement outlining the framework for an interim reciprocal and mutually beneficial trade agreement between India and the United States was issued on February 7.
A surge in gold and silver imports emerged as a central reason behind the widening trade deficit in January, according to officials and market sources. India imports substantial quantities of gold, with demand typically picking up ahead of the wedding and festive seasons. However, elevated bullion inflows significantly inflate the import bill. Recent data shows that heightened inflows of precious metals were a major contributor to the month’s trade imbalance.
Gold imports recorded an extraordinary rise of 359%, reaching US$ 12.1 billion—US$ 9.4 billion higher than a year ago. Inflows into Indian gold exchange traded funds, which are required to be backed by physical gold, nearly doubled in January, reaching Rs 240.4 billion (US$ 2.65 billion).
Silver imports increased sharply by 127% to US$ 2 billion. The steep increase in the value of precious metal imports was mainly driven by elevated international prices, significantly inflating the import bill and contributing to the wider trade gap.
Overall Trade Performance
Merchandise exports in January 2026 stood at US$ 36.56 billion, marginally higher (0.61%) than US$ 36.34 billion recorded in January 2025. But merchandise imports during the month rose to US$ 71.24 billion, compared with US$ 59.77 billion in the corresponding month last year.
Shipments to the United States declined 21.7% during the month to US$ 6.6 billion, compared to US$ 8.43 billion in the same period last fiscal. However, cumulative exports to the US during April-January continued to show resilience, registering a 6.73% increase YoY to US$ 72.46 billion.
The services sector provided crucial support to overall exports. Services exports expanded 26.33% year-on-year to US$ 43.90 billion in January, helping lift total exports (goods and services combined) by 13.2% to US$ 80.45 billion for the month. During April-January, overall exports grew 6.15% to US$ 720.8 billion.
India’s total exports (merchandise and services combined) for January 2026 are estimated at US$ 80.45 billion, reflecting a 13.17% increase compared to January 2025. Meanwhile, total imports (merchandise and services combined) during the month were estimated at US$ 90.83 billion, marking a growth of 18.76% year-on-year.
India’s total exports for April–January 2025–26 are estimated at US$ 720.76 billion, reflecting a growth of 6.15%. During the same period, total imports are estimated at US$ 823.41 billion, marking a 6.54% increase.
Non-petroleum and non-gems & jewellery exports stood at US$ 30.47 billion in January 2026, up from US$ 29.86 billion in January 2025. During the month Non-petroleum, non-gems & jewellery (including gold, silver and other precious metals) imports were valued at US$ 42.56 billion, compared with US$ 41.53 billion in the same month last year.
For the April–January period of 2025–26, non-petroleum and non-gems & jewellery exports rose to US$ 297.41 billion, as against US$ 281.59 billion in April–January 2024–25. During the same period, non-petroleum, non-gems & jewellery (gold, silver and precious metals) imports increased to US$ 414.52 billion, compared with US$ 381.21 billion a year earlier.
Sector-wise, engineering goods remained a key growth driver. Engineering Goods exports increased by 10.37% from US$ 9.42 Billion in January 2025 to US$ 10.40 Billion in January 2026.
Meat, Dairy & Poultry Products exports increased by 17.92% from US$ 0.52 Billion in January 2025 to US$ 0.61 Billion in January 2026. Marine Products exports increased by 13.29% from US$ 0.54 Billion in January 2025 to US$ 0.61 Billion in January 2026.
Iron ore exports increased by 31.54% from US$ 0.16 billion in January 2025 to US$ 0.21 Billion in January 2026. During January 2026, exports of other cereals recorded a sharp increase of 88.49%, while coffee exports rose by 36.03%. Shipments of fruits and vegetables grew by 1.77%, and cereal preparations and miscellaneous processed items expanded by 1.12%.
Man-made yarns, fabrics and made-ups posted a growth of 1.01%, while drugs and pharmaceuticals increased by 0.96%. However, electronics exports, which had grown 35.08% during April–December, slowed to just 0.32% growth in January. Traditional labour-intensive sectors such as textiles and garments, carpets, and handicrafts recorded a contraction, reflecting softer global demand conditions.
While exports to the US weakened in January, shipments to several other major markets (including UAE, China, Hong Kong, Netherlands and Italy) recorded strong growth. Exports to China rose 55.6% year-on-year to US$ 1.67 billion. Growth was also robust in the UAE (29.3%), Hong Kong (98.7%), the Netherlands (20.5%), and Italy (32.1%), indicating diversification of export destinations.
Commerce Secretary Rajesh Agrawal expressed confidence that the current growth trajectory would continue in the remaining months of the financial year. He indicated that total exports could reach US$ 860 billion this year, surpassing earlier projections of US$ 850 billion. In 2024–25, India’s overall exports stood at US$825.25 billion, with services contributing US$ 387.54 billion. Services exports are expected to cross US$ 410 billion for the first time this year.
As part of its evolving trade engagement with the United States, India has reportedly committed to reducing purchases of Russian oil and plans to more than double its annual imports of American goods. In parallel, a separate agreement with the European Union—expected to take effect within a year—could further strengthen India’s export outlook.
Despite the sharp rise in the monthly trade deficit, the Commerce Secretary asserted that the country’s overall export momentum remains on a positive path. Economists expect trade figures to stabilise as tariff rates moderate and new trade agreements begin supporting export growth.
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Trade performance
India and European Union trade agreement
United States-India joint statement
FAQ
India’s merchandise trade deficit rose to $34.68 billion primarily due to a sharp surge in gold and silver imports. Higher international bullion prices and strong domestic demand significantly inflated the import bill, while merchandise export growth remained modest.
Services exports grew by over 26% year-on-year, providing a strong cushion to the overall trade balance. The robust growth in services helped lift total exports (goods and services combined) to $80.45 billion in January 2026.
Engineering goods, marine products, iron ore, and several agricultural commodities recorded healthy growth. However, electronics exports slowed, and labour-intensive sectors such as textiles and handicrafts faced weaker global demand.
Shipments to the United States declined during January. However, cumulative exports during the April–January period remained resilient, indicating broader stability in trade relations.
Economists expect trade flows to stabilise as tariff pressures ease and new trade agreements come into effect. Market diversification and strong services exports are expected to support sustained export growth.
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