Trade deficit hits one-year high in October despite record exports

New Delhi: India’s merchandise trade deficit widened to a one-year high of $39.88 billion in October, as a surge in imports, driven by elevated energy prices amid the West Asia conflict, outweighed record goods exports.

Merchandise exports rose 45% year-on-year to a record $49.47 billion in October. Imports, however, climbed to $89.35 billion, up from $76.69 billion a year earlier and $74.61 billion in September. Petroleum imports alone jumped 54.3% from a year earlier to $22.82 billion.

“The year-on-year expansion in merchandise exports has been magnified by the low base related to the shift in the festive calendar, as well as the commodity price inflation that has been witnessed since February 2026, with the merchandise trade deficit coming in similar to our expectations,” said ICRA chief economist Aditi Nayar. The Diwali date changed to November 8 this year from October 20 in 2025.

A wider merchandise trade deficit may add to pressure on the rupee by increasing demand for dollars to pay for imports. However, the impact on the currency also depends on other foreign-exchange flows, including services trade and capital inflows. The funds mobilised through the Reserve Bank of India’s FCNR(B) deposit initiative have added to its foreign-exchange firepower, strengthening its ability to manage volatility and support the rupee.

Gold imports nearly tripled from September to $5.51 billion in October, from $1.8 billion, as jewellers stocked up ahead of festive purchases, aided by a correction in prices. The seasonal rise in gold demand, along with higher energy prices, offset some of the gains from strong goods exports.

The main drivers of export growth in October included petroleum products, electronics, gems and jewellery, chemicals, and engineering goods. Core exports, excluding the volatile petroleum and gems and jewellery segments, rose nearly 33% year-on-year to $37.38 billion. Core imports increased 32% to $57.37 billion.

The services trade surplus helped narrow the overall trade deficit to $20.09 billion in October, against $25.15 billion a year before.

Including services, total exports rose 29.91% year-on-year to $89.99 billion in October, while imports increased 16.57% to $110.07 billion. The services surplus helped narrow the overall trade deficit to $20.08 billion.

Cumulative exports of goods and services in the April-October period rose 16.66% from a year earlier to $568.84 billion. Services exports during the period were estimated at $259.78 billion, up nearly 11% year-on-year.

Merchandise exports in April-October grew nearly 22% year-on-year to $309.06 billion. Non-petroleum exports during the period rose 18% to $259.22 billion.

Among key export categories, petroleum products rose 140% year-on-year to $8.89 billion in October, while electronic goods exports increased 62.7% to $6.64 billion. Gems and jewellery exports rose 40.06% to $3.21 billion, organic and inorganic chemicals exports grew 36.2% to $2.89 billion, and engineering goods exports increased 36% to $12.74 billion.

Trade deals

Releasing the data, commerce secretary Rajesh Agrawal said exports had registered steady growth this year, supported by market diversification and new trade agreements with the UK and New Zealand. An agreement with the European Union is expected to take effect early next year.

Agrawal said negotiations with the US on a proposed trade deal were “on the right track”. The US is India’s largest export destination, with goods shipments rising 14.5% year-on-year to $59.52 billion in the April-October period.

Expert take

The export performance in October was encouraging, both in terms of the pace of growth and its geographical spread, said SC Ralhan, president of the Federation of Indian Export Organisations. “Expansion across 43 of our top 50 markets reflects the resilience of Indian exporters and their ability to seize opportunities despite global trade uncertainties,” he said.

Pankaj Chadha, chairman of EEPC India, said exporters had faced several challenges over the past few years, but new opportunities had also emerged.

“The free trade pacts India has signed with many key trade partners have opened new avenues for growth. We see strong opportunities ahead as new FTAs are signed with the European Union and other trade blocs,” Chadha said.