India's merchandise trade deficit will be under pressure in fiscal 2026, services sector to provide respite: Crisil

India's merchandise trade deficit will be under pressure in the fiscal year 2026, as domestic private consumption is expected to remain strong, maintaining imports up, the rating agency Crisil said in its recent report.

According to the rating agency, India's exports could also come under pressure due to the slowing economy and tariff related conditions in the United States.

However, as per the report, the service trade, which has proven to be more resilient and where India runs a surplus, will provide some cushion.


"Slowing global growth (3.0 per cent in calendar 2025 from 3.3 per cent in calendar 2024, as per S&P Global's November 2024 forecast) -- particularly of the US (2.0 per cent vs. 2.7 per cent), our largest export destination -- could hit India's exports," the report added.

As per the report, the global trade volume growth is also expected to moderate to 3.2 per cent in calendar 2025 from 3.4 per cent in calendar 2024 according to the United Nations, which could impact the overall trade.

The report also highlights that since India imposes higher tariffs and has a trade surplus, it would impact the country.

The rating agency highlighted that the risks to global trade have risen due to the ongoing tariff war initiated by the US.

"India is vulnerable to US tariff actions as it runs a trade surplus with the country and taxes imports from there at a higher weighted average tariff rate (9.5 per cent) than Washington's taxes on imports from India (3 per cent)," the report added.

According to the Crisil Intelligence, India's real gross domestic product (GDP) growth would be steady at 6.5 per cent in fiscal 2026 despite uncertainties stemming from geopolitical turns and trade-related issues led by US tariff actions.

This forecast for India's economy depends on two key factors. The rating agency anticipates that normal monsoon and commodity prices will continue to remain soft, which will keep the food prices stable.