India’s merchandise trade deficit narrowed in February to $27.1 billion as imports eased from a month earlier, even as trade experts have cautioned that the escalating West Asia crisis could stall shipments and raise costs for the nation heavily dependent on oil imports.
The impact of war was not reflected in the February data as the US and Israel launched their offensive on Iran on February 28, which led to a blockade of the Strait of Hormuz, spiking crude oil prices and turning gas (LNG and LPG) scarce and pricey in the international market.
Merchandise exports rose marginally to $36.61 billion in February from $36.56 billion a month earlier, while imports fell to $63.71 billion from $71.24 billion. Announcing the trade data for February, commerce secretary Rajesh Agrawal said exports would see a ‘southward’ trend in March due to the logistical challenges amidst geopolitical tensions.
“This year has been challenging for Indian exports, and there are logistical challenges due to the West Asia crisis,” Agarwal said.
While the deficit narrowed when compared with January, when it stood at $34.68 billion, the gap widened year-on-year from $14.05 billion recorded in February 2025.
For the 11-months of FY26, India’s merchandise exports went up 1.84 per cent to $402.93 billion, while imports rose 8.53 per cent to $713.53 billion during the period.
India’s exports to the US dipped 12.88 per cent year-on-year to $6.88 billion in February, even as it was up by 3.8 per cent in 11 months, while the trade deficit with China crossed $100 billion during the April-February period of this fiscal.
While growth in merchandise trade remained tepid, the service sector continues to perform well, climbing 10.2 per cent to $387.9 billion. Put together, goods and services reached $790.9 billion during April–February 2025–26, up 5.8 per cent from the same period a year earlier.
In contrast, imports grew faster, reaching $900.5 billion in the same period, a 7.4 per cent increase over the same period of last year.
If the trend continues, a rise in imports is expected to push India’s overall trade deficit to about $119.6 billion in the full fiscal year, compared with $91.1 billion a year earlier, GTRI said in a note.