New Delhi: India's trade deficit is expected to have decreased to USD 21.5 billion in February, down from USD 23 billion in January, as reported by Union Bank of India.
The report also highlighted that geopolitical risks, particularly concerns regarding tariffs, will continue to shape trade dynamics.
It stated, "Merchandise trade deficit likely narrowed in Feb'25 to USD 21.5 bln vis-a-vis USD 23.0 bln a month ago."
The reduction in the merchandise trade deficit is attributed primarily to a slowdown in the Non-Oil-Non-Gold (NONG) sector, aided by seasonal factors during the quarter.
Despite this positive trend, the report cautioned that the potential for a significant recovery in the trade balance may be constrained by rising worries over new trade barriers and tariff hikes following the recent changes in the U.S. administration.
Additionally, the oil trade deficit is anticipated to have decreased in February, influenced by a drop in global Brent crude oil prices, which fell from USD 78.35 per barrel in January to USD 74.95 per barrel in February.
A significant observation was the reduction in oil imports from Russia, which declined by 14.5 percent month-on-month to 1.43 million barrels per day, marking the lowest level since January 2023. Consequently, Russia's share of India's total oil imports fell to approximately 30 percent in February, a notable decrease from the 2024 average of around 38 percent.
While crude oil prices decreased in February, the report indicated that the effect on imports might be delayed due to advance contract signings. This could clarify why India's oil import expenditure decreased in January compared to December, despite an increase in both prices and volumes during that period.
Gold imports are projected to have increased to 70 tonnes in February, a rise from 40 tonnes in January. This surge is likely attributed to heightened seasonal demand associated with the marriage season.
Moreover, the demand for physical gold as an investment has remained robust, driven by pressures on more volatile assets such as equities. The report indicates that, amid ongoing global economic uncertainties during Trump's second term, the appetite for gold as a safe-haven asset is anticipated to continue.
In the future, the report emphasizes that geopolitical risks, especially those related to trade tariffs, will play a significant role in influencing India's trade performance in the upcoming months.
