Merchandise trade deficit widens to largest on record in October

Latest reading: In October, the trade balance was USD -41.7 billion (September: USD -32.1 billion), reaching a record low and substantially deeper than economists had expected. Over the last 12 months, the trade balance summed to USD -308.1 billion. Exports dropped 11.8% in year-on-year terms in October, coming on the back of a 6.8% rise in the prior month. Shipments to the U.S., India’s top export market, plunged for a second consecutive month as a result of America’s 50% tariffs. Imports rose 16.9% in annual terms in October, coming on the back of 16.7% growth in the prior month as the price of gold—a popular purchase during India’s religious Diwali festival—soared to a record high.

Outlook: Trade talks with the U.S. remain key to the outlook, after Washington hit India with an additional 25% levy for buying Russian oil, bringing total tariffs to 50%. In mid-November, India’s Commerce Secretary said that his country was “close” to concluding the first phase of a trade deal with the U.S. In recent weeks, India has taken multiple steps to appease the U.S., including scaling back purchases of Russian oil and ramping up imports of liquified petroleum gas from the States.

Panelist insight: EIU analysts said: “Concerns over US policy will arrest large foreign investment flows to India over 2026-27 if a trade deal with the US is not reached. The eventual inking of a trade deal with the US (likely in 2026), as both nations attempt to avoid a complete decoupling of markets, will result in stronger foreign investor interest in India.”

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