India’s trade deficit widened to a three-month high of $34.68 billion in January as inbound shipments surged 19 per cent year-on-year to $71.24 billion, driven largely by a sharp spike in gold and silver imports, according to data released by the commerce department on Monday.
Exports recorded a muted rise of 0.6 per cent Y-o-Y to $36.56 billion during the month, compared with $23.43 billion in January last year and $25 billion in December.
Services exports, however, provided a cushion, rising 26.3 per cent to $43.9 billion in January, while services imports grew 17.3 per cent to $19.6 billion, resulting in a surplus of $24.3 billion. The January services figures are provisional and will be revised following the subsequent release by the Reserve Bank of India.
Merchandise shipments to the United States contracted nearly 22 per cent to $6.59 billion in January amid a 50 per cent tariff imposed on several Indian exports. The decline underscored pressure on labour-intensive sectors as contracts came under strain in the absence of tariff relief.
However, the recent finalisation of a trade agreement with the United States — including the removal of a 25 per cent punitive tariff from February 7 and a proposed reduction in the reciprocal tariff to 18 per cent expected to take effect this week — is anticipated to provide relief to exporters.
On a cumulative basis from April to January, exports to the US grew 5.85 per cent to $72.46 billion despite the 50 per cent tariff coming into effect from August onwards.
Commerce Secretary Rajesh Agrawal said merchandise and services exports had remained in positive territory so far. “We will be nearing $860 billion in overall exports in the current financial year,” he said at a media briefing.
According to Aditi Nayar, chief economist at ICRA, goods imports unexpectedly expanded 19.2 per cent Y-o-Y in January, marking the second-highest monthly level after the $76.1 billion recorded in October 2025. She noted that the surge was almost entirely driven by gold imports, which ballooned to $12.1 billion from $2.7 billion in January 2025.
While oil imports remained largely flat compared to year-ago levels, non-oil, non-gold imports rose by a modest 4.9 per cent. Nearly 83 per cent of the annual increase in imports was attributed to gold, she said, cautioning that the higher-than-expected merchandise trade deficit could limit the extent of the current account surplus in the fourth quarter of FY26 unless imports moderate in the coming months.
Gold imports climbed 349.22 per cent to $12.07 billion in January, while silver imports rose 127 per cent to $2 billion.
Suchindra Misra, special secretary in the commerce department, said gold imports recorded a 1.83 per cent rise in value terms between April and December 2025, largely driven by a 24.62 per cent increase in unit prices despite an 18.29 per cent fall in volumes. He noted that the trend indicates a structural shift, with rising import values reflecting higher prices rather than increased physical demand.
Commerce department analysis showed that gold import values rose from $32.9 billion in FY19 to $58 billion in FY25 — a 76 per cent increase — even as volumes declined from 982.7 tonnes to 757.1 tonnes, a 23 per cent drop.
In contrast, the 128.95 per cent rise in silver import value between April and December was driven by both a 46.69 per cent increase in unit prices and a 56.07 per cent rise in volumes.
Non-petroleum and non-gems-and-jewellery exports — considered a key indicator of underlying export health — contracted 0.24 per cent to $32.78 billion in January. Among major sectors, engineering goods grew 10.37 per cent, electronic goods 0.36 per cent, drugs and pharmaceuticals 0.96 per cent, organic and inorganic chemicals 1.08 per cent, man-made yarns 1.01 per cent and marine goods 13.29 per cent.
Ajay Srivastava, founder of the Delhi-based think tank Global Trade Research Initiative, said the latest data highlighted the pronounced impact of US tariffs while pointing to early signs of market diversification.
“The downturn is concentrated in the US market rather than reflecting a global slowdown,” he said, noting that between April 2025 and January 2026, India’s exports to the US fell from $8.4 billion to $6.6 billion — a 21.3 per cent decline — dragging total merchandise exports down 4.4 per cent. Exports to the rest of the world edged up marginally during the period, suggesting exporters are gradually expanding beyond their largest single market.
