India’s merchandise trade deficit is expected to have narrowed to USD 20.88 billion in January 2025, down from USD 21.94 billion in December 2024, according to a report by Union Bank of India.
The report suggested that this improvement was primarily due to a decline in gold imports amid rising prices and the conclusion of the festival and wedding season.
It said “Merchandise trade deficit likely narrowed in Jan’25 to USD 20.88 bln vis-a-vis USD 21.94 bln a month ago.
This was probably led by marginal moderation in the demand for gold amid surge in prices in the backdrop of uncertainty in the global markets”.
The narrowing of the trade deficit was likely influenced by a decline in gold imports, as higher global prices reduced demand. Gold prices have been rising due to uncertainty in global markets, making purchases costlier.
Additionally, with the festival and wedding season coming to an end, the need for gold has subsided, further contributing to the lower trade deficit.
However, the report noted that the oil trade deficit widened slightly due to an increase in global crude oil prices. Brent crude oil prices rose to USD 78.35 per barrel in January from USD 73.13 per barrel in December. As a result, India’s crude oil imports saw an overall increase.
The report noted that India imported 1.67 million barrels per day (bpd) of crude oil from Russia in January, marking a 13 per cent increase from December. Imports from other major crude oil suppliers also rose.
Saudi Arabia’s crude oil exports to India grew by 12 per cent compared to the previous month, while crude oil imports from the US saw a massive surge of 322 per cent, reaching 279,000 bpd in January from 66,000 bpd in December. Kuwait and Brazil also saw an uptick in oil exports to India.
In contrast, oil imports from Iraq declined by 8 per cent month-on-month. India’s total crude oil imports in January increased by 6 per cent, reaching 4.98 million bpd, up from 4.70 million bpd in December.
Despite higher crude oil imports, exports of petroleum products faced challenges. It said “Exports of petroleum products took a hit amid sluggish demand in developed economies after logistical disruptions along major supply routes, majorly in the Red Sea”.
The report outlined that while India’s trade deficit improved in January, the rising oil import bill remains a concern.
The country’s dependence on crude oil imports and global market conditions will continue to influence its trade balance in the coming months.