India's Trade Deficit Narrows To $14.05 Billion In February

India’s trade deficit narrowed to $14.05 billion in February from $22.99 billion in January, according to data from the Ministry of Commerce and Industry.

The median estimate for trade balance was projected to be $21.35 billion, according to Bloomberg analysts. Forecasts from 23 economists had projected the deficit to be between $15.41 billion and $24.2 billion.

Trade deficit is currently at its lowest since August 2021, said L Satya Srinivas, additional secretary at the Ministry of Commerce and Industry. He attributed this to steep decline in imports, steady level of exports, and a high base effect from last February.

Merchandise exports increased by 1.3% to $36.91 billion in February, as compared to $36.43 billion in January. Exports, however, saw a sharp 10.8% decline from $41.41 billion in the same month last year.

Imports fell to $50.96 billion in February from $59.42 billion during January. From a year ago, imports fell by 16.3%.

For the fiscal so far, the trade deficit stood at $261.05 billion. Merchandise exports remained flat, while imports rose 5.7% from the same period a year ago.

In the services sector, exports were recorded at $35.03 billion, a 9.1% decrease from January, while imports similarly declined to $16.55 billion.

Gold imports for the fiscal stood at $53.53 billion, while oil imports for the period remained $166.73 billion. Non-oil exports were recorded at $337.01 billion.

The dip in merchandise exports in February is primarily due to subdued global demand and ongoing challenges faced by key export sectors, including the impact of the global tariff war, according to Ashwani Kumar, president of the Federation of Indian Export Organisations.

"While exports have faced challenges, particularly due to the global tariff war, the sharp decline in imports signals a reduction in demand for foreign goods, presenting opportunities for domestic industries to grow," he said, adding that the reduction in the trade deficit was a promising sign of India's trade sector beginning to rebalance. 

The FIEO has urged the government to expand the scope of the PLI schemes and improve access to competitive financing for exporters. Kumar also advocated for the continuation of the Interest Equalisation Scheme, increased support for research and development, the creation of a globally recognised Indian shipping line and the continuation of the Remission of Duties and Taxes on Exported Products Scheme for advance authorisation/EOU/SEZ units — all of which are essential to sustaining long-term growth in the export sector.