India’s October merchandise trade deficit widens to one-year high of $39.88 billion as imports surge

India’s merchandise trade deficit widened to a one-year high of $39.88 billion in October, exceeding economists’ expectations as imports rose faster than exports, according to government data released on Friday.

The deficit increased from $30.21 billion in September and was higher than the $33 billion recorded in October 2025. Economists had forecast the October deficit at $32.25 billion, according to a Reuters poll.

Merchandise exports rose to $49.47 billion from $44.40 billion in September, while imports increased to $89.35 billion from $74.61 billion.


“India recorded its highest-ever monthly goods exports in October 2026,” Trade Secretary Rajesh Agrawal said while releasing the trade figures.

Exports rose 11.4% month-on-month, while imports jumped 19.7%. The sharp increase in inbound shipments more than offset the growth in exports, resulting in a wider trade gap.

Energy costs add to import pressures

India, the world’s third-largest oil consumer, imports nearly 85% of its crude oil requirements. Disruptions in global energy markets linked to the conflict in West Asia have raised concerns over the country’s import bill.

Higher crude prices, longer shipping routes, elevated freight charges and war-risk insurance premiums have increased costs for India’s import-dependent economy. They have also raised input costs for businesses that rely on imported energy and raw materials, potentially squeezing exporters’ margins.

Brent crude futures have since fallen to around $92 a barrel, offering some relief to Asia’s third-largest economy amid hopes that the conflict will de-escalate after the Democrats won the US midterm elections.

The Reserve Bank of India has previously warned that a sustained increase in energy and transportation costs could put pressure on the current account, raise input costs for domestic businesses and create second-round inflationary pressures.

In September, merchandise exports grew 23.05% year-on-year to $44.40 billion, while imports increased 8.01% to $74.61 billion. The monthly trade deficit had widened from $26.86 billion in August but remained below the $33 billion recorded in September 2025.

RBI flags external-sector risks

In its October policy review, the RBI projected merchandise export growth of 11.6% and import growth of 11.7% for FY27. It estimated the current account deficit at 1.2% of GDP.

The central bank said strong services exports, remittance inflows and the implementation of recent trade agreements could support India’s external position. However, elevated energy prices, uncertainty over trade policies and slower global trade remain key downside risks.

The RBI also projected real GDP growth of 7.1% and inflation of 5.2% for FY27. It raised the repo rate by 25 basis points to 5.50% in October and shifted its monetary policy stance from neutral to calibrated tightening.

“The duration and extent of the rate hike cycle would be contingent on the actual growth-inflation developments and outlook,” the central bank said.

New trade deals to support diversification

India is seeking to strengthen its export prospects through new trade agreements and improved access to overseas markets.

Commerce and Industry Minister Piyush Goyal said on November 13 that trade negotiations between India and the US were progressing, with only a few issues remaining unresolved.

New Delhi has implemented trade agreements with the UK and New Zealand this year. The India-UK trade agreement came into force on July 15, while negotiations for the India-EU free trade agreement have concluded. The EU agreement is expected to be implemented early next year.

The deals form part of India’s broader effort to diversify export markets and deepen its integration with global supply chains.

The US remains India’s largest export destination, while China is its biggest source of imports.