New Delhi: It is anticipated that India's merchandise trade deficit has seen a slight reduction in August 2025, as per a report from the Union Bank of India.
The report projected that the trade deficit decreased to USD 26.1 billion in August, down from USD 27.4 billion in July.
It noted, "The merchandise trade deficit is expected to have narrowed slightly in Aug'25 to USD 26.1 billion compared to USD 27.4 billion the previous month."
The report indicated that this modest reduction was primarily driven by a significant increase in gold demand in anticipation of the upcoming festive and wedding season.
Despite the rise in prices, gold imports nearly doubled last month, contributing positively to trade activity. Conversely, commodity prices provided only slight relief.
Simultaneously, the report pointed out that trade dynamics continue to face challenges due to the impasse in the India-U.S. trade agreement. The U.S. represents approximately 20 percent of India's goods exports, and the stagnation in negotiations has negatively impacted outbound shipments.
To assist domestic industries grappling with tariff-related issues, the government has recently eased regulations under the Advance Authorization Scheme, permitting duty-free imports of raw materials for export production.
This initiative aims to protect exporters from the effects of the ongoing 50 percent U.S. tariff.
Looking forward, the report suggested that the trade deficit is expected to remain high in the short term. The forecast is influenced by robust gold imports during the festive season, consistent energy demand, and ongoing reliance on imports of electronics and capital goods.
Some relief might arise from the easing of global commodity prices and continued initiatives for import substitution. Nevertheless, export growth is anticipated to stay subdued due to weak global demand and tariff challenges.
The report also highlighted that any favorable progress regarding the India-US trade agreement could provide essential support for exports. By lowering tariff barriers, such an agreement would facilitate the recovery of exports to the U.S., which is India's primary trade partner.
Although the immediate effects may be limited, the report indicated that the agreement could contribute to strengthening India's export foundation over time, thus partially alleviating pressures on the trade balance in the upcoming quarters.
