India: Merchandise trade deficit widens in January
Latest reading: In January, the trade balance was USD -34.7 billion, following a USD -25.0 billion reading in the prior month. Over the 12 months to January, the trade balance summed to USD -318.5 billion.
Merchandise exports rose 0.6% in year-on-year terms in January, following 1.9% growth in the prior month. Merchandise imports rose 19.9% in annual terms in January, following 8.7% growth in the previous month.
Outlook: On 9 February, India and the U.S. announced a trade deal that would see Washington reduce tariffs from 50% to 25% after months of negotiations, leading our panelists to raise their forecasts for export growth in volume terms.
However, the two countries then froze further talks after the U.S. Supreme Court struck down large swathes of Trump’s tariff hikes on 20 February.
Panelist insight: Deepali Bhargava, Regional Head of Research for the Asia-Pacific region at ING, commented:
“The Supreme Court ruling arguably improves India’s negotiating position. With the IEEPA threat now off the table, India gains more room to re-examine elements of the interim agreement that may have been difficult to accept previously. The shift also eases pressure on sectors that had been vulnerable to punitive IEEPA treatment, providing India with a bit more leverage – and breathing space – as talks continue.”