Merchandise trade deficit shrinks in March

Latest reading: In March, the trade balance was USD -21.0 billion, following a USD -27.1 billion figure in the prior month. This was the smallest deficit since June 2025. Over the last 12 months, the trade balance summed to USD -331.6 billion. Merchandise exports fell 7.4% in year-on-year terms in March, coming on the back of a 0.8% drop in the prior month. Merchandise imports fell 5.7% in annual terms in March, coming on the back of a 25.0% increase in the prior month. March's reading was the weakest since August 2025.

Outlook: In recent trade news, in mid-April, India announced that it would send a delegation to the U.S. to resume trade talks, which had been halted following the Supreme Court’s decision in February to strike down Trump’s reciprocal tariffs.For now, U.S. tariffs on India sit at 10.0%—the same as in other countries subject to a universal tariff under Section 301 of the 1974 Trade Act—but these could rise as Trump explores alternative legal avenues to rebuild his tariff wall.

Panelist insight: HSBC’s Pranjul Bhandari and Aayushi Chaudhary commented of the impact of the Iran war on India’s import bill: “The oil import bill came in lower than February, suggesting that March reflects supply/availability constraints more than a price shock. Recall, India buys about half of its energy needs (45% of crude oil imports, 60% of LNG imports, and 80% of LPG imports) from the Middle East. In our view, the trade deficit widening has been pushed out rather than avoided. If the energy shock persists and Brent stays elevated, the deficit is likely to widen in the coming months.”

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