Gold Rush Pushes Deficit to Record Levels, Will Your Next Jewellery Purchase Cost More?

India’s merchandise trade deficit widened to a record $41.7 billion in October, sharply higher than USD 32.1 billion in September, according to Emkay Global Research. The spike was driven primarily by unmatched imports of gold and silver, which surged to historic levels.

Gold and Silver Imports See Unprecedented Surge
According to the report, total imports rose 11% MoM to $76.1 billion, led by:
Gold imports: ₹14.7 billion (up 53% MoM, 199% YoY)
Silver imports: $2.7 billion (up 108% MoM, 529% YoY)

These record inflows in precious metals were the single largest factor pushing the deficit to new highs.

Oil imports also rose 5% MoM, “possibly driven by the shift away from cheaper Russian imports due to sanctions,” the report noted.

Exports Decline Despite Partial US Recovery
Exports fell 6% MoM to USD 34.4 billion, with petroleum exports plunging 20% MoM.
Emkay highlights that exports to the US recovered 15% MoM in October after a sharp fall in September, largely due to higher electronics (including iPhones) shipments ahead of the US festive season.

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However, other export destinations such as Hong Kong, Spain, Brazil, and Bangladesh saw declines of 5–45% MoM, indicating that earlier spikes may have been transshipment-led.
In contrast, exports to China remained strong, rising 25% FYTD.

Tariffs Hit Select Sectors, Core Deficit Also Rises
Core imports (excluding oil, gems, jewelry, precious metals) rose modestly to $43.8 billion, while core exports slipped to $28.1 billion. This pushed the core deficit to $15.7 billion.

Tariff-related sector trends were mixed:
Gems & jewelry exports: down 4%
Textiles: down 1%
Marine products: up 16%
Electronics continued to outperform with 38% YoY growth for 7MFY26.

Services Surplus Hits Historic Peak, Provides Buffer

India’s services surplus surged to $20 billion in October, the highest ever recorded, supported by strong gains in both services exports and imports.
The September surplus was also sharply revised upward to $19 billion from the earlier $15.5 billion.
For 7MFY26, services surplus stands at USD 119 billion, rising 17% YoY, with gross services exports at USD 238 billion.

CAD Estimate Maintained but Risks Rising
Emkay Research maintained its FY26 Current Account Deficit (CAD) estimate at 1.2% of GDP, but flagged “upside risk of ~20 bps” due to higher precious metal imports.
However, the analysts noted that “strong net services exports provide a significant buffer,” and a favourable US-India tariff outcome could “sharply improve goods export growth.”