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Goods trade gap narrows even as US tariffs bite
Commerce secretary Sunil Barthwal said India’s exporters had done extremely well despite global and trade policy uncertainties
NEW DELHI: India’s merchandise exports in August saw 6.7% increase to $35.1 billion as compared to $32.89 billion in the same month last year with a significant reduction in trade deficit despite facing a 25% additional tariff in its biggest market, the US, from August 7 because of exporters’ grit and the government’s policy response, senior officials said.
“Despite global uncertainties and trade policy uncertainties, India’s exporters have done extremely well. It shows that policies of the Government of India have paid-off well,” commerce secretary Sunil Barthwal said on Monday while releasing the monthly trade data.
He said the government’s continued four-pillar reforms will help Indian exporters to withstand global headwinds such as geopolitical disruptions because of Russia-Ukraine and Israel-Hamas wars and the US tariff action, slapping a 25% tariff on Indian goods effective from August 7 and imposing another 25% secondary tariff from August 27. The four-pillars are domestic reforms such as Goods and Services Tax rationalization, product-wise and country-wise export diversion, import substitution and export promotion.
According to the latest official data, despite high tariffs, the US still remains India’s biggest export market. Indian merchandise exports to the US jumped 7.15% in August this year to $6.86 billion as compared to $6.41 billion in August 2024. Cumulatively, Indian exports to the US jumped 18.06% to $40.39 billion in April-August 2025 as against $34.21 billion in April-August 2024. The full impact of total additional 50% US tariff on Indian exports to America would, however, be felt next month.
The US has been the fourth largest import destination for India after China, Russia, and United Arab Emirates, according to the August data.
The US’ merchandise exports to India in August 2025 fell by 18.22% to $3.60 billion as compared to $4.41 billion in August 2024.
However, cumulatively, American exports to India increased 8.54% to $21.61 billion in April-August 2025 as compared to $19.91 billion in April-August 2024, according to the provisional data.
India’s policy of import substitution by enhancing domestic capacity has helped it in reducing imports. The country’s merchandise imports in August 2025 fell by over 10.1% to $61.59 billion as compared to $68.53 billion in August 2024. Barthwal said the policy is being pursued under the Prime Minister Narendra Modi’s ‘Atamnirbhar Bharat’ initiative, and the government plans to identify 100 import items such as chemicals and plastics that could be supplied by augmenting domestic capabilities.
Another reason for a decline in imports in August this year was a sharp 56% dip in gold imports (from $12.55 billion in August 2024 to $5.44 billion in August 2025) that helped to trim merchandise trade deficit to $26.49 billion in August 2025 as compared to $35.64 billion in August 2024.
According to the provisional estimates, overall exports in August 2025 (merchandise and services exports) rose to $69.16 billion as against $63.25 billion in corresponding month last year, a 9.34% jump. The cumulative imports in August 2025 stood at $79.04 billion, a fall of about 7% as compared to $84.99 billion in August 2024. Consequently, trade deficit narrowed significantly, to $9.88 billion as against $21.73 billion.
To be sure, services data for August 2025 are estimates, a conservative extrapolation of the previous month’s numbers as RBI releases figures for the services sector with a lag.
