India's Trade Deficit Narrows Below Expectations

(MENAFN) India's merchandise trade deficit contracted sharply to $20.67 billion in March, dramatically undercutting economist projections and signaling unexpected resilience in the country's external trade position despite deepening geopolitical turbulence in the Middle East.

The figure came in well below the $32.75 billion deficit forecast by a media poll of economists, and represented a substantial improvement on the $27.1 billion gap recorded just a month earlier in February. The narrowing was driven by a simultaneous uptick in exports and a pullback in imports, both influenced by the ongoing regional crisis.

Official government data showed New Delhi's merchandise exports climbed to $38.92 billion in March, up from $36.61 billion in February, while imports retreated to $59.9 billion from $63.71 billion over the same period.

Despite the encouraging monthly print, the broader outlook remains fraught. India's deep reliance on Gulf shipping corridors leaves it acutely exposed to the supply disruptions and freight cost escalations that geopolitical instability in the Middle East tends to generate.

Adding to the uncertainty, the US military announced Wednesday it had moved to halt maritime trade linked to Iran — even as President Donald Trump simultaneously claimed to be "permanently opening" the Strait of Hormuz, sending contradictory signals about the trajectory and terms of the conflict.

On an annual basis, India's combined goods and services exports are estimated to have grown 4.22% year-on-year to approximately $860 billion in the 2025-26 fiscal year, Commerce Secretary Rajesh Agrawal said Tuesday. Services exports for the fiscal year were pegged at $418.31 billion, with merchandise exports estimated at $441.78 billion.

India's trade surplus with the US narrowed considerably, falling to $34.4 billion in fiscal year 2026 from $43 billion the prior year. Exports to Washington edged up just 1% to $87 billion, while American imports into India surged 16% to $53 billion over the same period.

Amid the shifting trade landscape, bilateral negotiations between New Delhi and Washington are advancing. Commerce Secretary Agrawal confirmed in a post on X that both sides are working to convert a February 26 joint statement into a formal bilateral trade agreement, with meetings scheduled from April 20 to hammer out the structure and timelines of a deal. He added that the two governments are currently in the process of finalizing mutual concessions.

In a notable realignment of India's commercial relationships, China displaced the US as New Delhi's largest trading partner in the 2025-26 financial year, according to Beijing's embassy in New Delhi — ending a four-consecutive-year run during which Washington had held that position.

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