India’s merchandise trade deficit widened to a three-month high of $34.68 billion in January, driven mainly by a sharp surge in gold and silver imports, government data showed on Monday.
The latest figures mark the final month affected by the steep 50% U.S. tariff on Indian exports, which Indian officials say will be reduced to 18% later this week.
According to India’s commerce ministry, total imports rose 12% month-on-month to $71.24 billion, while exports fell 5% to $36.56 billion, pushing the deficit far above market expectations.
Economists surveyed by Reuters had forecast an overall trade deficit of $26 billion for January, compared with $25.04 billion in the previous month.
A trade ministry official said the jump in imports was largely driven by higher shipments of gold and silver.
Gold imports alone surged to $12.07 billion in January, up sharply from $4.13 billion in December.
In addition, inflows into Indian gold exchange-traded funds (ETFs) — which must be backed by physical gold — nearly doubled in January to 240.4 billion rupees ($2.65 billion).
Kotak Institutional Equities warned that continued strong inflows into gold ETFs, along with sustained physical gold imports, could increase pressure on India’s current account deficit.
U.S. President Donald Trump earlier this month announced that Washington would cut tariffs on Indian goods to 18% from 50%, bringing relief to exporters and policymakers.
Trump also said India has agreed to reduce purchases of Russian oil and plans to more than double its annual imports of U.S. goods.
India’s trade secretary Rajesh Agrawal said a trade delegation will travel to Washington next week to finalise a trade agreement. The two countries are currently working under an interim framework concluded earlier this month.
Merchandise exports to the United States — India’s largest export market — fell 4.5% month-on-month to $6.58 billion in January.
However, shipments to the U.S. rose to $72.46 billion during the first ten months of India’s fiscal year, the data showed.
Government estimates also indicated that services exports in January were $43.90 billion, while services imports were $19.60 billion, implying a services trade surplus of around $24.30 billion, according to Reuters calculations.
India’s central bank is expected to release detailed monthly services trade data in about two weeks.