India’s goods trade deficit narrowed to $26.86 billion in August, its lowest level in five months, from around $32 billion in July, helped by a sharp decline in gold imports, according to government data released on September 15.

The trade deficit had widened for three consecutive months from April through July before narrowing sharply in August.

Gold imports fell to $2.3 billion in August from $4.16 billion in July, offsetting some of the pressure from elevated energy costs and geopolitical disruptions affecting global oil supplies. Total merchandise imports declined to $70.67 billion during the month.

Merchandise exports stood at $43.81 billion in August, slightly below July’s $44.24 billion. However, August exports  were the highest for the month in a decade.

India’s broader external trade position was stronger when services were included. Goods and services exports jumped 25 percent year-on-year to $82.68 billion, while services exports were estimated at $38.87 billion, generating a services trade surplus of $17.45 billion. This brought the overall goods-and-services trade deficit down to $9.41 billion.

The improvement in the merchandise trade gap comes despite continuing pressure from higher crude prices. India’s crude oil basket averaged $90.19 a barrel in August and climbed further to $109.76 in September.

Higher oil prices could put renewed pressure on India’s import bill and merchandise trade balance in the coming months, particularly as the country remains heavily dependent on crude oil imports.

The United States continued to be India’s largest export destination. India’s shipments  to the US reached $42.79 billion during April-August, according to the latest government data.

Commerce Secretary Rajesh Agrawal said India’s earlier large trade deficits were partly driven by strong domestic demand, while the government is continuing efforts to diversify export markets through trade agreements and other measures.

Automobile exports provided another positive signal, rising 22.2 percent year-on-year to 681,000 units, led by two- and three-wheelers. Passenger-vehicle exports, , however, declined 17 percent, highlighting uneven performance across segments of India’s auto export industry.