India's Trade Deficit Shrinks To 3.5-Year Low At USD 14.05 Bn In Feb Amid Export & Import Contraction

(MENAFN- KNN India) New Delhi, Mar 18 (KNN) India's merchandise trade deficit contracted significantly to USD 14.05 billion in February, marking its lowest level in three-and-a-half years.

This represents a substantial reduction from the USD 19.52 billion deficit recorded in February 2024, according to data released by the Commerce Department on Monday.

The narrowing deficit resulted from sharp contractions in both exports and imports, influenced by softening global petroleum prices and growing economic uncertainty amid restrictive trade practices implemented by the United States.

Outbound shipments from India fell by 10.9 percent year-on-year to USD 36.91 billion in February, the steepest decline in 20 months.

Commerce officials attributed this partly to the high base effect, noting that exports had reached USD 41.4 billion during the same period last year.

Imports declined even more dramatically, falling 16.3 percent to USD 50.96 billion, marking the most significant reduction in 20 months and the first decrease in 11 months.

This contraction was primarily driven by a 29.6 percent drop in oil imports to USD 11.9 billion, alongside a substantial 62 percent decrease in gold imports to USD 2.3 billion.

The outlook for India's merchandise exports remains uncertain as the United States plans to implement reciprocal tariffs on trading partners beginning April 2.

The US has already imposed a 25 percent duty on steel and aluminum imports. Indian exporters report that American importers are increasingly delaying orders in anticipation of further tariff announcements.

India's export performance contrasts with other emerging market economies. China, the world's largest trading nation, saw exports increase by 7.1 percent in January-February 2025, while Vietnam's outbound shipments grew by 8.4 percent during the same period.

On a cumulative basis, India's merchandise exports remained flat at USD 395 billion during the first 11 months of the current financial year.

Commerce Secretary Sunil Barthwal expressed confidence that despite challenges in FY25, India remains on track to achieve USD 800 billion in combined exports of goods and services.

In the previous financial year, India's total trade in goods and services amounted to USD 778 billion.

Non-petroleum and non-gems-and-jewellery exports, often considered a more accurate indicator of export health, declined by nearly 5 percent to USD 28.57 billion in February.

Key sectors experiencing contractions included gems and jewellery (-20.7 percent), drugs and pharmaceuticals (-1.5 percent), organic and inorganic chemicals (-24.5 percent), petroleum products (-29.2 percent), and engineering goods (-8.6 percent).

However, some sectors demonstrated growth, including rice (13.2 percent), electronic goods (26 percent), and readymade garments (4 percent).

Federation of Indian Export Organisations (FIEO) President Ashwani Kumar acknowledged that while exports have faced challenges from the global tariff war, the sharp decline in imports signals weaker demand for foreign goods, potentially creating opportunities for domestic industries.

He emphasised the need for concerted efforts to revitalise export growth through targeted initiatives that enhance India's global competitiveness, including diversifying exports, exploring new markets and products, and maintaining trade facilitation measures.

The services sector showed more positive results, with exports rising 23.6 percent to USD 35.03 billion in February and imports increasing 8.6 percent to USD 16.55 billion, resulting in a surplus of USD 18.5 billion.

The Commerce Department noted that the February services trade data represents an estimate and will be revised following the Reserve Bank of India's subsequent release.

(KNN Bureau)

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