Editor’s Note
This article highlights a concerning trend in India’s trade balance, with the deficit expanding to an estimated $28 billion in September 2025. The primary driver is a sharp, price-insensitive surge in gold imports. This underscores the persistent pressure on the current account and raises questions about domestic demand dynamics amidst high global prices.
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According to a report by Union Bank of India, India’s merchandise trade deficit is estimated to have widened to USD 28.0 billion in September 2025, up from USD 26.5 billion in August.
This increase in the trade deficit is primarily due to a sharp surge in gold imports, which nearly doubled month-on-month despite record-high prices.
The report states that the rise in gold demand is mainly driven by the onset of the festival and wedding season, which typically boosts bullion purchases.
This increase occurred as global commodity prices saw a modest rise, with the CRY index increasing to 301.78 in September from 296.64 the previous month.
Apart from gold imports, the overall trade dynamics are likely to be affected by delays in the US-India trade agreement.
The United States accounts for nearly 20 percent of India’s merchandise exports, and a slowdown in bilateral trade momentum could impact exports.
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Going forward, the trade deficit is expected to remain elevated in the near term. The deficit is likely to stay high due to strong gold imports ahead of the festive season, robust energy demand, and continued reliance on imports of electronics and capital goods.
Some relief may come from softening global commodity prices and ongoing import substitution initiatives, but export growth remains sluggish amid weak global demand and tariff-related challenges.
On the trade negotiation front, India and the US are making progress towards a potential first-phase trade agreement, with discussions expected to continue until November 2025.
Commerce Minister Piyush Goyal and External Affairs Minister S. Jaishankar have highlighted the importance of constructive cooperation but also emphasized the need to protect India’s core interests.
Once implemented, tariff barrier reductions under the agreement could support an improvement in exports to the US, India’s key trading partner.
Therefore, the report indicates that India’s trade deficit is likely to remain under pressure in the near future due to strong import demand and limited export growth. In contrast, ongoing trade talks with the US offer a potential path for improvement in the future.