India’s merchandise trade deficit narrowed to $26.86 billion in August from $31.98 billion in July, helped by robust export growth and a sharp decline in gold imports.
Merchandise exports surged 26.12% year-on-year to $43.81 billion, while imports rose 14.1% to $70.67 billion, provisional commerce ministry data showed on Tuesday. August exports were the highest for the month in a decade.
Gold imports, meanwhile, fell to $2.3 billion from $4.16 billion in July, helping offset the pressure from higher energy costs. Crude oil prices remained elevated, with India’s crude basket averaging $90.19 a barrel in August, up from $82.04 in July.
To be sure, Prime Minister Narendra Modi in May urged Indians to avoid non-essential gold purchases for a year to help conserve foreign exchange and reduce the country’s import bill. He renewed the appeal in September, asking consumers to refrain from buying gold unless necessary.
Total exports, including services, rose to $82.68 billion from $65.93 billion a year ago, while total imports climbed to $92.09 billion from $77.55 billion. The overall trade deficit narrowed to $9.41 billion from $11.62 billion in August 2025. Services data for August is provisional, with the latest available Reserve Bank of India (RBI) data being for July.
For the April-August period, total exports were estimated at $399.27 billion, up 15.55% from $345.55 billion a year earlier, while total imports rose 18.01% to $459.65 billion. The cumulative overall trade deficit widened to $60.38 billion from $43.94 billion a year earlier.
Merchandise exports during the period rose 17.85% to $215.91 billion from $183.21 billion a year earlier, while merchandise imports increased 18.21% to $363 billion from $307.09 billion.
Services exports during April-August were estimated at $183.36 billion, up 12.95% from $162.34 billion a year earlier, while services imports stood at $96.65 billion, up 17.30% from $82.40 billion.
Oil burden
On the import side, petroleum, crude and products accounted for the largest share at $95.57 billion, followed by electronic goods at $66.48 billion and machinery, electrical and non-electrical, at $28.46 billion. Gold imports stood at $17.47 billion, while transport equipment, non-ferrous metals, coal, coke and briquettes, organic and inorganic chemicals, artificial resins and plastic materials, and vegetable oils were among the other major import categories.
Crude oil imports, which account for up to 25% of the total import bill, contributed to the rise in imports. As of July, India’s crude import bill has already reached $63.37 billion, up 56% from a year ago, accounting for more than half of the total oil import bill of $123 billion for 2025-26.
The November contract of the benchmark Brent is currently around $108 per barrel. The Indian basket of crude oil, which represents a derived basket comprising the Sweet grade (Brent Dated) and the Sour grade (Oman and Dubai average) of crude oil imported by Indian refineries, was at $128.70 as of 14 September.
India, which imports about 90% of its crude oil, remains particularly exposed to sustained price increases. Estimates by Bank of Baroda show that a persistent $1 increase in crude prices can raise the country’s annual import bill by around ₹18,000 crore.
Inflationary pressure has been building amid volatility since the start of the war in West Asia earlier this year. In August, India’s retail inflation rose to a 20-month high of 4.82%, driven by higher fuel and food prices, taking it above the Reserve Bank of India’s 4% target midpoint for the third consecutive month since January 2025. Wholesale inflation also edged up to 9.92% in August from 9.78% in July, according to government data released on Monday.
Geography split
The US remained India’s largest export destination during the period, with shipments worth $42.79 billion, followed by the United Arab Emirates at $13.59 billion and China at $9.61 billion. Singapore, the Netherlands, the UK, Germany, South Africa, Bangladesh and Malaysia were the other major destinations, with exports of $9.50 billion, $6.95 billion, $6.15 billion, $5.33 billion, $4.82 billion, $4.72 billion and $4.36 billion, respectively.
remained India’s largest import source during the five-month period, accounting for $65.49 billion of imports, followed by Russia at $41.44 billion and the US at $28.09 billion. The UAE, South Korea, Saudi Arabia, Singapore, Japan, Hong Kong and Germany were the other major sources, with imports of $24.36 billion, $12.10 billion, $11.81 billion, $11.40 billion, $9.71 billion, $9.41 billion and $9.16 billion, respectively.
Engineering goods remained the largest export commodity, with shipments worth $58.70 billion, followed by petroleum products at $35.31 billion and electronic goods at $26.66 billion. Organic and inorganic chemicals, drugs and pharmaceuticals, gems and jewellery, readymade garments, cotton yarn and textiles, rice, and plastic and linoleum products were the other major export categories.
“The 26.12% growth in merchandise exports in August is a very encouraging performance and yet again reflects the resilience, competitiveness and adaptability of Indian exporters,” said S.C. Ralhan, president, the Federation of Indian Export Organisations.
He said that encouraging export growth across markets such as China, Singapore, Germany, South Africa, Malaysia, Tanzania, Hong Kong, Australia, Spain and Sri Lanka points towards greater diversification of the country’s export basket. Exports to Brics countries grew 13.3% during April-August 2026, while exports to China surged 38.71%. Shipments to the US grew 6.17%, while exports to the European Union increased 3.84%.
“The diversification of markets is particularly important in the present global environment. Stronger engagement with Brics, emerging economies and other high-potential markets will help Indian exporters build greater resilience and reduce concentration risks,” he added.