India’s trade deficit surged to a record $41.68 billion in October as imports rose sharply following a cut in domestic consumption taxes, while exports slipped due to ongoing US tariff policies, according to data released Monday by the Ministry of Commerce and Industry.
Economists had forecast a deficit of $30 billion in a Bloomberg survey, highlighting the extent to which rising imports outpaced overseas shipments. September’s trade deficit stood at $32.14 billion, reflecting elevated gold and oil imports.
The widening gap is likely to add further pressure on the Indian rupee, which has fallen 3.5% against the US dollar this year, making it Asia’s second-worst performing currency. The rupee has hovered near a record low of 88.8050 per dollar since October, affected by foreign portfolio outflows and uncertainty around a potential trade deal with the US.
Imports Soar, Exports Slump
Imports climbed 16.6% year-on-year to $76.06 billion in October, driven by higher domestic demand during the festival season. A significant reduction in goods and services tax, effective September 22, fueled consumption and contributed to the spike in inbound shipments, Bloomberg Economics noted.
Conversely, exports fell 11.8% from a year earlier to $34.38 billion. Shipments to the United States, India’s largest trading partner, dropped by roughly 12% in September, as American tariffs imposed in August continue to weigh on outbound shipments. The 50% tariffs were applied partly in response to India’s purchases of Russian oil and high tariff barriers on US goods.
Outlook
Despite the current strain, recent discussions between India and the US have indicated optimism that a deal may be reached to lower the high tariffs, which could help ease pressure on exports.
Analysts warn that the combination of rising imports and subdued exports may maintain stress on the rupee in the near term, underscoring the challenges India faces in balancing domestic consumption growth with external trade pressures.
Bloomberg’s coverage emphasized that while domestic policy has boosted internal demand, external trade dynamics—including US tariffs—remain a significant headwind for India’s trade balance.
