India’s merchandise trade deficit narrowed to $26.86 billion in August, from $27.20 billion in the same month last year, as goods exports grew at a faster pace than imports, Commerce Secretary Rajesh Agrawal said.
The trade deficit also declined sequentially from nearly $32 billion in July, according to the latest trade data.
Merchandise exports registered a robust 26.12 per cent year-on-year growth in August to reach $43.18 billion, while imports rose 14.1 per cent to $72.67 billion.
Agrawal said export growth was led by engineering goods, petroleum products, chemicals and textiles, with strong demand coming from the US, European Union and BRICS economies.
A sharp decline in gold imports also contributed to the narrowing of the trade gap. Gold imports fell to $2.3 billion in August, less than half the $5.4 billion recorded in August 2025.
Meanwhile, India’s current account deficit stood at $4.2 billion, or 0.5 per cent of GDP, during the April-June quarter of the current financial year, according to data released by the Reserve Bank of India earlier this month.
The CAD was estimated at 0.4 per cent of GDP in the corresponding quarter of the previous financial year. The latest figure came despite higher global prices of oil, LPG and fertilisers amid the West Asia crisis.
India’s external sector has also received a boost from a rise in foreign exchange reserves. According to data cited by Bloomberg, India became the world’s fourth-largest holder of foreign exchange reserves following a record increase in its forex kitty.
India’s foreign exchange reserves rose by $44.9 billion to a record $785.7 billion during the week ended September 4, displacing Russia from the fourth position. China, Japan and Switzerland ranked ahead of India.
The increase came despite a $2.59 billion decline in gold reserves, which stood at $113.81 billion during the week amid a fall in gold prices.
A strong foreign exchange reserve position provides the Reserve Bank of India greater room to intervene in currency markets during periods of volatility. The central bank can use its reserves in spot and forward markets to provide dollar liquidity and help limit sharp movements in the rupee.
-IANS
