India Trade Deficit Narrows To $26.5 Billion In August

India's merchandise trade deficit narrowed to $26.49 billion in August 2025, down from $27.35 billion in July, driven by a 6.7% year-on-year rise in exports to $35.1 billion and a 10% contraction in imports to $61.6 billion. Despite the imposition of additional 50% tariffs by US President Donald Trump starting August 27, India’s exporters performed well amid global trade uncertainties, supported by government policies aimed at export diversification and supply chain resilience. The United States remains a crucial market, with exports to the country rising significantly, although ongoing trade disputes have created challenges for exporters. The Indian government has implemented measures such as relaxing norms under the Advance Authorization Scheme to support exporters against tariff impacts. Overall, export competitiveness is expected to improve further with recent GST reforms and production-linked incentive schemes, while efforts continue to reduce dependency on a limited number of markets and boost domestic production for import substitution. Analysts had forecast a lower trade deficit, but the actual figure still reflects a positive trend compared to previous months.