India’s merchandise trade deficit rose to a 13-month high of USD 32.2 bn in Sep-25 from USD 26.5 bn in Aug-25.
Download ReportQuantEco Research | Sep-25 Merchandise trade - Deficit starts to widen
While both exports and imports expanded sequentially in Sep-25, the widening of the headline deficit was on account of imports outpacing exports. As much as 86% of the incremental widening of the trade deficit can be ascribed to Gems and Jewellery items, which seem to be facing the brunt of record-high prices at the moment. On the exports front, the value of shipments to the US contracted by 11.9% YoY in Sep-25, the worst performance in 27 months. This will likely weaken further in the coming months. On the imports front, there was a noticeable moderation in Russia’s share. Going forward, if the singular penalty tariff of 25% on India extends for a longer period, then there will be an erosion of its US export market share. Under this scenario, India’s current account deficit could rise towards 1.1-1.2% of GDP in FY26, vis-à-vis our existing forecast of 0.8%. On an optimistic note, there are signs of thawing of the US-India trade relationship. The re-commencement of trade negotiations is an encouraging development. One hopes that this eventually culminates in a preliminary version of the India-US Bilateral Trade Agreement, along with the rationalization of the tariffs imposed on India.