India’s merchandise trade deficit reached a record $41.68 billion in October 2025, driven by a massive surge in gold imports and falling exports amid new US tariffs. This gap, much wider than expected, highlights pressures from festive demand and global trade tensions, raising concerns for the economy as the year ends.
Surge in Gold Imports Drives Deficit
Gold imports jumped nearly 200 percent to $14.72 billion in October, compared to $4.92 billion a year earlier. This spike came from strong festive season demand during events like Diwali, when families buy jewelry and coins as gifts and investments.
Silver imports also soared, rising over 500 percent to $2.73 billion. Together, these precious metals added billions to the import bill, pushing total imports up 16.66 percent to a record $76.06 billion.
Experts point out that lower import duties on gold earlier this year encouraged more buying. Consumers snapped up gold worth an estimated $11 billion during the five-day festival period alone.
This trend shows how cultural traditions mix with economic policy to influence trade. While it boosts local jewelers, it strains the overall balance.
US Tariffs Hurt Key Exports
New US tariffs of up to 50 percent on Indian goods, imposed in late August, hit exports hard. Shipments to the US, India’s top market, dropped 8.6 percent to $6.3 billion in October.
Key sectors felt the pain:
- Gems and jewelry exports fell 29.5 percent to $2.3 billion.
- Engineering goods declined 16.7 percent to $9.4 billion.
- Textiles like cotton yarn and ready-made garments dropped 12 to 13 percent.
These items rely heavily on the US market, which still accounted for $52 billion in exports over the first seven months of the fiscal year.
Exports to other partners varied. Sales to China rose 42 percent to $1.6 billion, offering some relief. But declines to places like the United Arab Emirates, down 10.2 percent, and the United Kingdom, down 27.16 percent, added to the woes.
Overall exports shrank 11.8 percent to $34.38 billion, the sharpest drop in 14 months. This comes against a high base from last year and ongoing global slowdowns.
Broader Trade Picture and Comparisons
To understand the scale, compare October’s figures with recent months. The deficit was $32.15 billion in September and $26.22 billion a year ago.
Here’s a quick table of key trade data for October 2025:
| Category | Amount (USD Billion) | Year-on-Year Change |
|---|---|---|
| Exports | 34.38 | -11.8% |
| Imports | 76.06 | +16.66% |
| Trade Deficit | 41.68 | From $26.22B |
| Gold Imports | 14.72 | +199% |
| Silver Imports | 2.73 | +529% |
This data reveals how imports outpaced exports dramatically. Analysts note that without the gold rush, the deficit might have stayed closer to estimates around $29 billion.
Economic Impacts and Rupee Pressure
The widening deficit puts pressure on India’s currency. The rupee hit new lows against the dollar recently, partly due to these trade imbalances.
A larger current account deficit, projected at 2.4 to 2.5 percent of GDP in the third quarter, could slow growth. This fiscal year, it might reach 1.2 percent if tariffs persist.
On the positive side, India has boosted US oil and gas buys to narrow its trade surplus with America. Talks for lower tariffs continue, with hints from US leaders about possible cuts.
These steps aim to stabilize relations. If successful, they could lift exports in sectors like tech and pharmaceuticals, which have shown resilience.
India’s economy grew 6.7 percent in the last quarter, but trade woes might trim forecasts. Policymakers watch closely as global events, like US elections, shape future deals.
Outlook for Coming Months
Imports may ease in November and December as festive demand fades. Exports could pick up if tariffs soften or new markets open.
Rating agencies predict a slight narrowing of the deficit soon. Yet, risks remain from oil prices and global demand.
India plans more farm product buys from the US to build goodwill. This could balance trade and support rural economies on both sides.
Long term, diversifying exports beyond the US and boosting manufacturing at home will be key. Programs like Make in India aim to cut import reliance.
The situation tests India’s trade strategy in a shifting world. Staying agile will help navigate these challenges.
What do you think about India’s trade challenges? Share your views in the comments and pass this article to friends for more discussion.
