India’s Trade Deficit Shrinks to $14.05B in Feb, Lowest Since Aug 2021

Trade Deficit Shrinks as Imports Decline, Exports Hold Steady

India’s merchandise trade deficit narrowed significantly to $14.05 billion in February 2025, marking its lowest level since August 2021, according to data released by the Ministry of Commerce and Industry. The sharp decline in the trade gap is attributed to a drop in imports, while exports remained steady.

The trade deficit stood at $23 billion in January, meaning February’s figures reflect a nearly 39% month-on-month improvement. On a year-on-year (YoY) basis, the gap also narrowed from $19.51 billion recorded in February 2024, signaling an improvement in India’s external trade balance.

Highlights:

• India’s trade deficit in February 2025: $14.05 billion (lowest since August 2021)
• January 2025 trade deficit: Nearly $23 billion
• February 2024 trade deficit: $19.51 billion
• Month-on-month improvement: ~39% decline in trade deficit
• Year-on-year improvement: ~$5.5 billion lower than February 2024

Government Attributes Narrowing Deficit to Trade Policy Measures

The Commerce Ministry highlighted that the improvement in India’s trade balance was driven by:

• A decline in imports, particularly in non-essential categories.
• Steady export growth, supported by government initiatives and trade diversification.
• Strategic bilateral trade discussions, particularly with major partners like the United States.

The government has been actively working to enhance trade partnerships, reduce import dependencies, and increase domestic production under the ‘Make in India’ initiative.

India-U.S. Trade Talks Gain Momentum

Commerce Secretary Sunil Barthwal stated that India is in active discussions with the United States to increase bilateral trade to $500 billion by 2030. The proposed trade deal aims to cover multiple sectors and enhance economic cooperation between the two countries.

“Measures to raise trade between India and the US to $500 billion by 2030 will be discussed, and the proposed deal is multi-sectoral,” Barthwal said.

Further, he highlighted that Union Minister Piyush Goyal had recently met with the U.S. Trade Representative (USTR) and the U.S. Commerce Secretary to advance negotiations.

“Goyal met with the Commerce Secretary and USTR during his visit to the US. There were positive talks, and discussions are continuing,” he added.

Addressing Trade Tariffs and Bilateral Challenges

The Commerce Secretary also acknowledged that India is closely monitoring U.S. tariff measures and their implications for Indian exporters.

“We are doing stakeholder consultations on these issues and will be resolving them bilaterally,” Barthwal noted.

Trade Deficit Reduction: What It Means for India

1. Lower Trade Deficit Eases Pressure on Rupee

A lower trade deficit reduces India’s foreign exchange outflow, helping stabilize the Indian Rupee (INR) against major global currencies like the U.S. dollar.

2. Encouraging Signs for Economic Growth

The narrowing trade gap signals improving trade balance dynamics, potentially supporting higher GDP growth.

3. Reduced Import Dependence

The decline in imports, particularly in non-essential sectors, aligns with the government’s push for domestic manufacturing and self-reliance.

4. Strengthening Global Trade Relations

India’s active trade discussions with the United States and other key partners could lead to new agreements, tariff relaxations, and improved export opportunities.

As India continues to work toward a more balanced trade environment, policymakers are expected to focus on further strengthening exports and diversifying trade partners to sustain this positive momentum.