India's Exports Rise 6.7% in August Amid Challenges

India’s exports rose 6.7% YoY to $35.1 billion in August, aided by a low base but challenged by US tariffs and global uncertainties. Imports dropped 10.13%, narrowing the trade deficit to $26.49 billion. Services exports grew 12.18%, with a surplus of $16.61 billion. Non-petroleum exports increased 6.1%, driven by electronics and pharmaceuticals. However, escalating US tariffs may impact September exports, with government reforms aiming to boost competitiveness.

India’s merchandise exports showed resilience in August, climbing 6.7% year-on-year (YoY) to reach $35.1 billion, even as global uncertainties and steep tariffs from the United States posed significant challenges. This growth was partly attributed to a low base of $32.9 billion recorded in August 2024. However, on a month-on-month basis, exports dipped 5.7% from $37.24 billion in July, highlighting the ongoing volatility in global trade.

Exports to the US: A Mixed Bag

The United States, India’s largest export market, saw a 7.15% YoY increase in shipments from India, totaling $6.86 billion in August. This growth occurred despite the imposition of a 25% tariff on Indian goods starting August 7. However, the monthly export numbers to the US fell to their lowest level in nine months.

The tariff situation worsened later in the month, with the US introducing an additional 25% levy on August 27, effectively doubling the total duty to 50%. Trade analysts have warned that the full impact of this hefty tariff will become apparent in September, potentially leading to a significant decline in exports to the US and widening India’s overall trade deficit.

Aditi Nayar, Chief Economist at ICRA, remarked, “The additional penalty is expected to considerably dampen exports to the US in September, likely resulting in a sharper contraction in total exports and a broader trade imbalance.”

Decline in Imports Narrows Trade Deficit

India’s merchandise imports contracted by 10.13% in August, amounting to $61.59 billion. A sharp 57% YoY drop in gold imports played a major role in the overall decline. This reduction in imports helped narrow the trade deficit to $26.49 billion, down from the record $35.64 billion seen in August 2024 and slightly lower than the $27.35 billion recorded in July.

Services Trade: A Bright Spot

India’s services exports continued their upward trajectory, growing 12.18% to $34.06 billion in August. Meanwhile, imports of services rose 6% YoY to $17.45 billion, resulting in a surplus of $16.61 billion. The Department of Commerce noted that these figures are preliminary estimates and are subject to revision based on data from the Reserve Bank of India.

Commerce Secretary Sunil Barthwal lauded the performance of India’s exports despite global headwinds. “This demonstrates the effectiveness of government policies. Recent reforms related to goods and services tax (GST) will further enhance competitiveness,” he said.

Sectoral Highlights: Non-Petroleum Exports Shine

Non-petroleum, non-gems, and jewellery exports—a key indicator of underlying trade health—rose 6.1% YoY to $28.31 billion. Key contributors to this growth included:

• Engineering goods: Up 4.91%

• Electronics: A robust rise of 25.93%

• Drugs and pharmaceuticals: Grew by 6.94%

• Organic and inorganic chemicals: Increased by 3.76%

Aditi Nayar pointed out that India’s merchandise trade deficit of $26.5 billion in August was higher than the average of $23.7 billion recorded during April-July. However, it was substantially lower than the $35.6 billion deficit seen a year ago, which had been inflated by a one-off surge in gold imports.

India’s trade landscape in August painted a mixed picture of resilience and challenges. While exports showcased strength in certain sectors and markets, the looming impact of escalated US tariffs is expected to weigh on future performance. The narrowing trade deficit, aided by declining imports, provided some relief. Moving forward, government reforms and policy measures will play a crucial role in bolstering India’s trade amidst an evolving global economic environment.