Merchandise Trade Deficit Contracts to $24.5 Billion as India’s November Data Improves

Merchandise Trade Deficit Shrinks to $24.5 Billion, Marking a Strong Turnaround

India’s merchandise trade deficit narrowed sharply to $24.53 billion in November, offering a major relief after October’s elevated gap of $41.68 billion. Data released by the Commerce Ministry on December 15 shows that the contraction was driven largely by a steep fall in gold imports, along with moderation in oil and coal shipments.

For investors and policymakers alike, the November numbers signal improving trade dynamics and a stabilisation after the volatility seen in the previous month. The sharp sequential improvement has also strengthened confidence around India’s external sector resilience amid global uncertainty.

Exports and Imports Snapshot Shows Improving Balance

Merchandise exports in November 2025 stood at $38.13 billion, while goods imports came in at $62.66 billion, resulting in the significantly lower trade deficit.

On a broader level, India’s total exports—including goods and services—rose strongly to $73.99 billion in November, up from $64.05 billion in the same month last year. Imports, meanwhile, slipped marginally to $80.63 billion, compared with $81.11 billion in November 2024.

The data suggests that while global demand remains uneven, India has managed to protect export momentum while keeping imports in check—an encouraging sign for the country’s balance of payments position.

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Gold Imports Drop Nearly 60%, Driving the Deficit Reduction

Commerce Secretary Rajesh Agarwal highlighted that the sharp fall in gold imports played a decisive role in narrowing the merchandise trade deficit.

“Gold imports have declined in November by about 60 percent, which has helped narrow our deficit,” Agarwal said during the official briefing.

Gold imports are traditionally one of the largest contributors to India’s trade gap, given the country’s high domestic demand. The steep decline in November indicates a combination of factors, including high prices, demand moderation after festive buying, and policy-related checks on non-essential imports.

In addition to gold, Agarwal noted that imports of oil and coal also moderated during the month, further easing pressure on the import bill.

Services Exports Remain a Key Pillar of External Stability

India’s services trade continued to provide strong support to the overall trade balance. Services exports rose to $35.86 billion in November, up from $32.11 billion, reflecting sustained global demand for Indian IT services, business consulting, and professional services.

Services imports increased marginally to $17.96 billion, compared with $17.25 billion in the same period last year. The resulting surplus in services trade helped offset part of the merchandise trade deficit, reinforcing India’s position as a net exporter of services.

For investors, the steady growth in services exports remains a structural positive, providing a cushion against fluctuations in merchandise trade caused by commodity price swings.

October Losses Offset as Trade Normalises in November

Agarwal described November as a corrective month following October’s unusually high trade deficit.

“November has evened out our losses in October,” he said, adding that cumulative performance remains encouraging.

Between April and November of the current financial year, combined merchandise and services exports stood at around $29 billion higher on a year-on-year basis, underlining the resilience of India’s export sector despite a challenging global environment.

The October spike in the trade deficit was driven by higher imports and temporary disruptions in export flows. November’s sharp correction suggests that those pressures were short-lived rather than structural.

What the Narrower Trade Deficit Means for Investors

From an investor perspective, the narrowing of India’s trade deficit has several positive implications:

• Rupee Stability: A lower trade deficit reduces pressure on the rupee by limiting dollar outflows, especially during periods of global financial tightening.

• Improved Current Account Outlook: With services exports holding strong, a narrower merchandise gap improves visibility on the current account balance.

• Macro Confidence: Stable trade numbers enhance confidence in India’s macroeconomic management, supporting equity and bond market sentiment.

However, analysts caution that sustained improvement will depend on global demand conditions, commodity price trends, and the durability of the slowdown in gold and energy imports.

Outlook: Watch Global Demand and Commodity Prices

Looking ahead, India’s trade trajectory will remain sensitive to movements in crude oil prices, global growth trends, and currency fluctuations. While November’s data provides comfort, maintaining export momentum will be critical in the coming months.

If gold imports remain subdued and services exports continue to grow, India could see further improvement in its trade balance, offering additional macroeconomic stability as the financial year progresses.

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