India’s merchandise trade deficit narrowed in February, offering some relief to the country’s external balance, but escalating conflict involving Iran is creating fresh uncertainty for exporters and global trade flows.
According to government trade data, India’s trade deficit stood at about $27.1 billion in February, down from around $34.7 billion in January. The improvement was largely driven by a decline in imports, while exports recorded modest growth during the month.
Despite the narrowing gap, the ongoing conflict in West Asia has raised concerns across the export sector. The region is a crucial trading partner for India, accounting for roughly $100 billion in annual shipments of goods including petroleum products, engineering goods, rice, and chemicals.
Exporters are increasingly worried about disruptions to shipping routes and higher freight and insurance costs, particularly around the Strait of Hormuz, one of the world’s most critical energy and trade corridors. Any escalation in the conflict could slow cargo movement and delay deliveries to key markets in the Gulf region.
Some sectors have already begun to feel the impact. Indian rice exporters, for instance, have reported slower shipments as maritime risks and rising logistics costs complicate trade with Middle Eastern buyers.
Industry groups have urged the government to introduce support measures to help exporters manage rising costs and logistical challenges. Officials are reportedly evaluating potential financial assistance and policy measures aimed at protecting export competitiveness during the ongoing geopolitical crisis.
Analysts say that while the narrowing trade deficit provides short-term relief, prolonged instability in the region could disrupt trade flows, push up energy prices, and weigh on India’s export outlook in the coming months.