India's Trade Dynamics Shift Signals Positive Trajectory

India's trade deficit contracted in November 2025, showing signs of economic stabilization. The merchandise trade deficit dropped significantly, and exports rose, partly due to easing import shocks. The pending US-India trade deal could further boost exports by reducing tariffs. The current account deficit is projected to improve as trade conditions stabilize.

In a hopeful turn for the Indian economy, the country's trade deficit contracted sharply in November 2025, indicating possible stabilization in economic conditions. According to a report from the Union Bank of India, the merchandise trade deficit fell to USD 24.53 billion, a dramatic improvement from October's record of USD 41.68 billion.

This change exceeded market expectations and pointed to a potential turning point in the nation's trade conditions. Exports witnessed a rise while imports normalized, suggesting that the effect of earlier seasonal and one-off import spikes was diminishing. India's external sector now shows clear signs of improvement in the second half of the year.

As negotiations for a bilateral trade deal between India and the US near their conclusion, potentially by late December, export conditions could further improve due to a reduction in tariffs from 50% to about 15-16%. While the near-term impact might be limited, the agreement is anticipated to strengthen India's export capability over time.

The oil trade deficit showed a slight improvement to USD 10.18 billion, despite higher crude imports. This was driven by subdued oil prices, with a USD 10-per-barrel change affecting the annual current account balance by nearly USD 15 billion.

The gold deficit fell to USD 4.30 billion in November, even as global gold prices remained high, primarily due to a cooling of domestic demand after festive buying. Non-oil, non-gold imports, encompassing sectors like machinery, electronics, and chemicals also saw normalization.

(With inputs from agencies.)