India’s Trade Deficit Narrows to $27.1 Billion in February 2026

India’s merchandise trade deficit narrowed to $27.1 billion in February 2026, down from $34.7 billion in January, according to data released by the government on Monday. This reduction comes despite a modest decline in exports and a significant increase in imports compared to the same month last year. The trade deficit remains considerably wider than the $14.4 billion recorded in February 2025, prompting concerns among economists regarding future trends.

Export and Import Dynamics

In February, India’s exports fell slightly by 0.8 percent, totaling $36.6 billion. Meanwhile, imports surged 24 percent to $63.7 billion year-on-year. The substantial increase in imports reflects ongoing pressures within the global market, particularly as the conflict in West Asia escalates.

Despite the challenges in merchandise exports, there was notable growth in services exports, which rose by 25 percent to approximately $39.5 billion, compared to $31.7 billion in February 2025. Services imports also increased, from $14.5 billion to $16.4 billion, which contributed to a net services surplus that provided some stability to the overall trade balance.

On the merchandise export front, non-petroleum exports grew modestly by 6.4 percent to $33.2 billion, with engineering goods exports increasing to $10.4 billion from $9.2 billion. Electronic goods exports also saw a gain, climbing to $4.2 billion from $3.8 billion during the same period. Despite these gains, gems and jewellery exports remained largely unchanged at $2.6 billion.

Persistent Import Pressures

The rise in imports was more pronounced, particularly for non-petroleum goods, which jumped 29 percent to $50.7 billion in February 2026. Petroleum, crude oil, and related products also saw a rise of 9 percent, increasing to $13 billion from $11.9 billion.

Over the first eleven months of the financial year, India’s trade deficit reached $311 billion, significantly higher than the $262 billion recorded in the same period last year. Total imports rose 8.3 percent from $658 billion to $714 billion from April 2025 to February 2026. Notably, gold imports surged by 28.7 percent, silver imports more than doubled with a 143 percent increase, and electronics imports grew by 17.6 percent. Conversely, crude oil imports declined by 3 percent.

China remained the largest source of imports for India, totaling $119 billion, followed by the UAE at $61 billion, Russia at $51 billion, and the US at $48 billion.

Madan Sabnavis, chief economist at Bank of Baroda, noted that the modest growth in merchandise exports, which increased by 1.8 percent to $403 billion, was largely supported by a significant rise in electronics exports, which grew by 28.1 percent. However, he highlighted that growth in readymade garments and chemicals was nearly flat, while fuel product exports declined due to low oil prices.

Future Outlook Amid Global Tensions

Despite the relatively positive data for February, economists are closely monitoring March for potential impacts from the ongoing conflict. Sabnavis indicated, “This picture will get clearer in March where the major war impact will be seen.” With crude oil prices exceeding $100 per barrel and heightened volatility in other commodities, the situation presents further uncertainties.

Disruptions to sea trading routes could compound these challenges. While the combined goods and services deficit appears manageable, experts warn that March’s data, influenced by high oil prices and logistical bottlenecks, will put additional pressure on the Indian rupee.

Sabnavis remarked that while trade balance shifts will affect the rupee’s value, “stronger forces like remittances and foreign portfolio investments may dictate the direction given their significance.” As India navigates these turbulent waters, the implications of global events will become increasingly critical to its economic stability.