Merchandise trade deficit increases in September

Latest reading: In September, the trade balance was USD -32.1 billion, following a USD -26.5 billion figure in the previous month. September’s deficit was the widest in just over a year and was higher than economists had expected. Over the last 12 months, the trade balance summed to USD -290.6 billion. Exports rose 6.1% in year-on-year terms in September, coming on the back of 6.7% growth in the previous month. Imports were up 16.7% in annual terms in September, following a 10.1% drop in the prior month, likely boosted by the government’s recent cut to the consumption tax. Imports of gold rose especially sharply, linked to safe-haven demand plus the festive and wedding season in the country.

Outlook: Key to the outlook for goods exports ahead will be trade talks with the U.S., after Washington hit India with an additional 25% tariff in early August for buying Russian oil, bringing total levies up to 50%. The two countries appear increasingly close to striking a deal, with President Trump and Prime Minister Modi having spoken at least twice in recent weeks, and the U.S. President recently stating that India has pledged to phase out Russian oil imports, a key demand of the administration.

Panelist insight: Nomura’s Aurodeep Nandi and Sonal Varma said: “We expect export growth to remain weak due to higher US tariffs, while import growth will likely hold up, keeping the trade deficit elevated. A potential detente with the US on trade is possible but remains uncertain. We expect the current account (CAD) deficit to widen to 1.0% of GDP in FY26 from 0.6% in FY25.”

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