India’s merchandise trade deficit widened to a two-month high in October, driven by a rise in imports, data released by the commerce ministry on Thursday showed.

The goods trade deficit—the difference between exports and imports—stood at $27.14 billion in value terms in October, up from $20.78 billion in September. The deficit was $29.65 billion in August, $23.5 billion in July, $20.98 billion in June, $23.78 billion in May, and $19.1 billion in April. A year ago, the deficit stood at $30.43 billion. Economists had expected the October trade deficit to be $22 billion, according to a Reuters poll.

India’s merchandise exports touched $39.2 billion in October, up from $34.58 billion in September and $ 33.43 billion in October 2023, according to government data. However, imports surged to $66.34 billion from $55.36 billion in September and $63.86 billion in October 2023. 

The widening deficit underscores persistent challenges in balancing trade despite incremental growth in outbound shipments.

Services sector
Services exports rose to $34.02 billion in October from $30.61 billion in September and $28.05 billion in the year-ago period. They came in at $30.69 billion in August, $28.43 billion in July, $30.27 billion in June, $30.16 billion in May, and $29.57 billion in April.

Services imports also increased to $17 billion in October from $16.32 billion in September and $13.46 billion a year ago. In August, services imports stood at $15.7 billion, compared with $14.55 billion in July, $17.29 billion in June, $17.28 billion in May, and $16.97 billion in April.

The combined value of merchandise and services exports touched $73.21 billion in October, up from $65.19 billion in September and $61.48 billion in the year-ago period. The overall trade deficit, including both services and merchandise, fell to $10.12 billion in October, down from $15.85 billion in October 2023.

Global headwinds
India’s foreign trade has been affected by weak demand in major markets, geopolitical tensions, and volatile commodity prices, leading to a widening of the trade deficit. Sluggish growth in India's key markets has lowered demand for key exports while rising global fuel costs have increased expenses.

In April, the World Trade Organisation (WTO) had forecast a recovery in global merchandise trade in 2024 following a weak 2023 that was marked by inflation and high energy prices. The WTO expects trade volumes to grow by 2.6% in 2024 and 3.3% in 2025, though geopolitical risks remain.

India’s export drivers
Engineering goods, petroleum products, electronics, pharmaceuticals, chemicals and readymade garments were key drivers of merchandise exports in October, while major imports included cruel oil, petroleum products, electronic goods and gold. 

India’s major export destinations during this period included the US, the UAE, the Netherlands, the UK and China. China, Russia, the UAE, the US and Iraq remained the top suppliers, reflecting the country’s dependence on imports for key inputs such as energy.