India’s Trade Deficit Narrows to 42-Month Low Amid Falling Exports and Imports
India’s merchandise trade deficit decreased to $14.05 billion in February, a sharp decline from the previous year’s $19.52 billion deficit. The trade gap decreased as exports and imports decreased because of worldwide economic uncertainties and changing commodity prices.
Indian exports showed a 10.9% yearly decline reaching $36.91 billion according to official government projections while imports decreased by 16.3% to $50.96 billion. The trade deficit reached its lowest level since August 2021 because of these changes, which indicated that India was moving toward an improved trade balance. The export drop occurred due to the strong performance in the previous year which included the additional day from the leap year in February 2024.
Declining Exports Impacted by Global Economic Trends
India has encountered export difficulties for multiple months reaching its fourth consecutive month in February. The global economic slump led to a major decrease in India’s export performance, especially in gems and jewelry, petroleum products, and chemicals. Worldwide trade tensions and protectionist policies implemented by major markets have reduced international demand for Indian exports.
The growth in exports to the USA (9.1%), UK (12.47%) and Japan (21.67%) failed to counteract the negative export trend across all regions. Multiple experts warn about a potential sustained negative effect on India’s international trade relations based on the country’s current conditions. The increase in India’s service exports reached $35.03 billion in February, rising by 23.6%, which provided some relief from the decline in merchandise exports.
Falling Imports Drive Trade Deficit Reduction
Reduced imports from India were a significant factor in reducing the trade deficit for the country. The substantial decline in import quantities of crude oil and gold functions as key factor that reduced India’s trade deficit. The value of imported crude oil decreased by 29.6% to reach $11.9 billion and gold imports fell by 62% to $2.3 billion. The reduction in commodity prices at the global level combined with shifts in Indian market consumption patterns led to these market declines.
The Indian economy experienced market expansion for non-petroleum, non-gems, and jewelry imports, which rose to $35.02 billion during February, up from $33.96 billion the previous year. Despite a decrease in total import costs, domestic consumers continued to purchase foreign products at their previous levels. Officials highlighted that lower import levels might not indicate reduced consumer needs because prices of essential products like oil and gold altered.
The February trade data from India reveals various global market influences, including tariff implementations, changes in product prices, and shifting consumer preferences. The Indian economy demonstrates resilience in its ability to adopt these challenges toward achieving $800 billion in annual good and service exports for the current fiscal year.
