India's trade deficit narrows to $14.05 bn in February from January’s $22.9 bn

Economists had expected the February trade deficit to ease to $21.65 billion, according to a Reuters poll.

India’s exports last month were affected, with concerns growing about the looming effects of Trump's proposed tariffs, according to government sources cited by Reuters.

In addition to this, geopolitical risks, especially concerns over tariffs, will continue to influence trade dynamics, as per a UBI report.

The reduction in the merchandise trade deficit was mainly driven by a moderation in the Non-Oil-Non-Gold (NONG) segment, supported by seasonal factors during the quarter, the report added.

Live Events

Despite this improvement, the report said that the extent of recovery in trade balance may be limited due to growing concerns over new trade restrictions and tariff increases following the change in the U.S. administration.

Merchandise exports in January stood at $36.43 billion compared with $38.01 billion in December, while imports for the month were $59.42 billion.

Looming tariff threat

The US president has threatened to impose reciprocal tariffs on countries starting April 2, which would raise import taxes to match the tariffs that trading partners impose on American goods. A Bloomberg report, citing economists, warned that India could be one of the hardest-hit nations due to the significant difference in import duties between the US and India, which is about 10 percentage points on average.

The impact of these tariff changes on India’s exports to the US could be substantial, as the US is a major market for Indian goods. EXIM Bank's deputy MD, Deepali Agrawal, said that the effects will depend on the specifics of the US tariffs, but emphasised the need to allow time for the situation to stabilise before