India’s August 2025 Trade Deficit Narrows 54.6% YoY to USD 9.9 Billion Amid Record Global Trade Uncertainty | Monthly Economic Review

Persistent global shocks—including tariff uncertainties, geopolitical tensions, and supply chain disruptions—have reshaped international trade dynamics, , according to the Ministry of Finance’s August 2025 Monthly Economic Review.

Global Trade Uncertainty at Record Levels

In 2025, uncertainty reached unprecedented levels, with the Trade Policy Uncertainty (TPU) Index peaking in Q2 CY25 at the highest quarterly level since 1960. On a QoQ basis, the TPU Index rose 101.3% in Q1 CY25 and 63.7% in Q2 CY25, driven by industrial policies, competition for critical raw materials, and unilateral trade measures by several nations. Against this challenging backdrop, India’s trade performance in August 2025 demonstrated remarkable resilience.

Trade Performance: Deficit Narrows Significantly

India’s total trade deficit (merchandise and services) stood at USD 9.9 billion in August, down 54.6% YoY, supported by robust services exports and a decline in merchandise imports. Total exports grew 9.3% YoY, led by services exports rising 12.2%, while imports fell 7%. Merchandise exports rose 6.7%, with non-petroleum, non-gems, and jewellery exports contributing 80.7% (USD 28.3 billion) of total merchandise exports.

Gold imports plunged 56.7% YoY due to rising global prices and import restrictions, narrowing the merchandise trade deficit to USD 26.5 billion from USD 35.6 billion in August 2024. The services trade surplus, at USD 16.6 billion, offset around two-thirds of the merchandise deficit.

Also Read: Indian Economy Soars : GDP Growth Hits 7.8% in Q1 2025-26 | Republic World

Domestic Economic Momentum Remains Strong

According to the Ministry of Finance’s August 2025 Monthly Economic Review, real GDP grew 7.8% YoY in Q1 FY26, with manufacturing and services leading growth while agriculture held steady. Real GVA rose 7.6%. Private consumption, accounting for 60.3% of nominal GDP—the highest first-quarter share in 15 years—remained the primary driver, supported by gross fixed capital formation, which grew 7.8% and retained a 30.4% share of GDP.

Inflation, Labour Market, and Reserves

Headline inflation edged up to 2.07% in August but remained below the 4% target, with food prices at -0.69% and core inflation steady at 4.16%. A well-distributed monsoon boosted kharif sowing and reservoir levels, supporting the rabi crop outlook. Labour force participation reached a four-month high of 55%, while unemployment eased to 5.1%. White-collar hiring grew 3.4% YoY, led by AI, insurance, and hospitality sectors. Foreign exchange reserves touched USD 703 billion, providing 11.6 months of import cover.