India's trade deficit narrows as exports rise 26% in August

Merchandise imports rose 14.1% to $70.67 billion, while gold purchases plunged nearly 58% from a year earlier.

India’s merchandise exports in August saw a robust annualised growth of over 26% to $43.81 billion, outpacing about 14% growth in imports at $ 70.67 billion, thus narrowing the trade deficit on the back of policy measures such as trade diversification, bilateral deals and curbs on unproductive imports of commodities like gold.

The government attributed the export momentum to trade diversification, the Export Promotion Mission and free-trade agreements. (Unsplash/Representational image)

Export growth accelerates further in August

Stating that India’s export growth momentum has been strong in the first four months of the current financial year, commerce secretary Rajesh Agrawal said: “Export growth momentum [has] accelerated further in August.” Cumulative trade data of both merchandise and services showed that exports in the first quarter (April-June) of 2026-27 “climbed by over 13% to $236.28 billion,” he said.

Overall growth of exports (goods and services combine) accelerated further to 16.58% in July this year to $ 82.42 billion, and by estimated 25.4% to $82.68 billion in August, he said on Tuesday while releasing latest trade data for the month. Services data for August are estimates, a conservative extrapolation of the previous month’s numbers, as RBI releases figures for the services sector with a lag.

Import growth trails exports for first time

Speaking about inward shipments, he said merchandise imports in August 2026, has been at $70.67 billion as compared to $ 61.96 billion in the same month last year. “That means a growth of 14.1%... First time you will see, this is lower than the export growth,” he added.

“And overall [goods and services] trade deficit, if you look at, it is $9.41 billion [in August 2026] as compared to $11.62 billion [in August] last year. So, overall trade deficit has also gone down substantially,” he said.

Gold imports plunge nearly 58% in August

According to experts, one of the reasons for narrowing of the trade deficit is a sharp fall in imports of gold in August 2026. Import of gold fell by nearly 58% to $ 2.3 billion in August 2026 as compared to $ 5.44 billion in August 2025. Even on a sequential basis, it fell by 45% as against $ 4.16 billion in July 2026.

Prime Minister Narendra Modi on May 10 urged people to avoid non-essential foreign travel and postpone gold purchases for a year. The government on May 13 raised customs duty on precious metals, including gold and silver, to 15% from 6%, to reduce imports and conserving foreign exchange for essential imports such as energy and fertilisers amid the protracted war in West Asia.

Five-month trade gap remains higher despite August improvement

According to the commerce secretary, the trade deficit has shown a notable improvement in August 2026. Yet, the cumulative gap for first five months is higher than the last year. Speaking about surging import demand, which led to a higher trade deficit in first five months, he said, it was also propelled by strong domestic economic expansion, rising energy requirements and the critical inputs needed to sustain the rapid growth of our manufacturing sector. India’s exports are growing despite global headwinds because of conscious policy decisions such as trade diversification, ₹25,000 crore Export Promotion Mission (EPM) and free trade agreements with nearly 40 countries since 2021 such as Australia, the United Arab Emirates (UAE) and the United Kingdom (UK).

According to Agrawal, the India-New Zealand free-trade agreement (FTA) is expected to be operational next month even as a large team of negotiators from Canada is in New Delhi, negotiating with their Indian counterparts.

India and Canada have already finalised two chapters of their proposed a Comprehensive Economic Partnership Agreement (CEPA), the commerce secretary said. India and the European Union expect to sign an FTA deal by the year end or even earlier, he added.