India’s merchandise trade deficit widened a tad to USD 23.0 bn in Jan-25 from USD 21.9 bn in Dec-24.
Download ReportQuantEco Research || Jan-25 Merchandise Trade - Geopolitics and geoeconomics to drive shots
Trade deficit in Jan-25 widened on account of Machinery items, Ores and minerals, Agri and allied products, and Electronics items, even as the deficit under petroleum and precious metals moderated. Although India’s FYTD current account deficit is moving along the anticipated path, large data revisions on account of computation errors impart a downside to our FY25 estimate of 1.3% of GDP. For FY26, global geopolitics and geoeconomics have taken centerstage. PM Modi’s recent visit to the US appears promising from a medium-term perspective, with both India and US expected to forge new bilateral deals in the areas of energy, defense, and technology. However, the specter of ‘reciprocal tariffs’ puts India under the spotlight with its weighted average MFN tariff of 12.0%, the highest among G20 nations. We hope that India will be able to negotiate out of the US reciprocal tariff, which is expected to go live from Apr-25. For now, we maintain our FY26 current account deficit estimate of 1.3% of GDP while attaching a wide tail to the risk factors on both sides.