India’s Trade Deficit Narrows To 42-Month Low As Imports Plunge

India’s merchandise trade deficit narrowed to a 42-month low of $14.05 billion in February 2025. The trade deficit contracted 28% year-on-year and 39% month-on-month, driven primarily by a fall in imports.

On an annual basis, this marks the steepest reduction in the trade deficit in 17 months, indicating a correction in India's trade balance. The fall can be attributed to benign commodity prices and domestic demand moderation.

India’s merchandise imports declined 16% year-on-year to $50.96 billion in February, the lowest import level in 22 months. This is the first time in 11 months that merchandise imports have decreased on a yearly basis.

The decline in exports, however, capped the contraction in deficit. Exports fell 11% year-on-year to $36.91 billion in February, the sharpest fall in 20 months. This also marks the fourth straight month of decline in exports.

The reduction in imports was primarily driven by a significant fall in the shipments of crude and petroleum products, as well as gold and silver. Excluding these, overall imports remained nearly flat at $36.3 billion. Crude oil and petroleum product imports fell 29.6% to $11.89 billion, while gold imports contracted 62% to $2.34 billion. Silver imports also plummeted to $430.7 million from $1.73 billion a year earlier.

Oil prices fell by about 4% during the month.

Exports of petroleum products also fell 29.2% year-on-year to $5.81 billion in February.

The shrinking trade deficit may bring relief to India’s current account and ease pressure on the rupee. However, the simultaneous decline in both exports and imports points to broader economic weaknesses, both domestically and globally, which will need careful monitoring by policymakers.