India’s trade deficit narrows to $20.67bn in March, a 9-month low.
Export growth driven by strong demand from the United States.
Overall FY trade deficit widens despite partial relief from US market.
India's merchandise trade deficit narrowed in March, falling to a nine-month low of $20.67billion as a surge in exports to the United States helped absorb the damage from the Iran conflict that has choked shipping routes, inflated energy costs and hammered trade with the Middle East.
Exports climbed to $38.92bn from $36.61bn the previous month, whilst imports fell to $59.59bn from $63.71bn, according to data released by the trade ministry on Wednesday.
1 April 2026
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The principal driver of the export recovery was the United States. Shipments to India's largest export market rose 17.4% month on month to $8.02bn, buoyed by the reduction in US tariffs to 10% following the Supreme Court ruling that struck down the country-specific levies imposed under IEEPA. Textiles and engineering goods led the recovery, capitalising on a market that had been partially closed to Indian exporters by tariffs of up to 50% on a wide range of goods.
The relief, however, is only partial. Exports to West Asia dropped by $3.5 billion in March, trade secretary Rajesh Agrawal told reporters in New Delhi, directly attributing the fall to the impact of the Iran war. Freight and insurance costs remain elevated, and the Strait of Hormuz — blocked for the better part of six weeks — continues to create severe delays for vessels moving goods through the region.
The relief, however, is only partial. Exports to the Middle East dropped by $3.5 billion in March, trade secretary Rajesh Agrawal told reporters in New Delhi, directly attributing the fall to the impact of the Iran war. Freight and insurance costs remain elevated, and the Strait of Hormuz — blocked for the better part of six weeks — continues to create severe delays for vessels moving goods through the region.
Aditi Nayar, Chief Economist, ICRA said that the narrowing trade deficit would provide some respite to the current account balance in Q4 FY2026, which would nevertheless likely witness a deficit to the tune of 0.6% of GDP in the quarter, in contrast with the typical seasonal surplus that is seen during the last quarter of the fiscal.
For the full fiscal year ended March, India's combined goods and services exports rose 4.22 per cent to $860.09 billion, whilst imports grew 6.36 per cent to $978.40 billion — widening the overall trade deficit to $119.3 billion from $94.66 billion the previous year. The data captures an economy pulled simultaneously in two directions: a partial opening on the American side, and a significant disruption on the one it was least prepared to absorb.
