India's Trade Deficit Shrank in March on Surging US Exports
By Reuters | 15 Apr, 2026

India's merchandise trade deficit unexpectedly fell to a 9-month low of $20.67 billion thanks to a 17.4% jump in exports to the US.

India's merchandise trade deficit unexpectedly narrowed in March as a surge in exports to the U.S. helped cushion the impact of the ongoing Iran war that has disrupted shipping routes and inflated energy costs.

The deficit fell to a nine-month low of $20.67 billion, with exports rising to $38.92 billion in March from $36.61 billion in the previous month and imports falling to $59.59 billion from $63.71 billion, data from the trade ministry showed on Wednesday.

Exports to the U.S. rose 17.4% month-on-month to $8.02 billion, supported by a cut in tariffs to 10% following a U.S. Supreme Court ruling. This has helped boost shipments of textiles and engineering goods to India's largest export market that had imposed tariffs of up to 50% on a wide swath of goods.

The trade data underscore the opposing forces shaping India's export outlook: supply disruptions and surging logistics costs stemming from the Iran conflict and a partial revival in U.S. demand.

While lower tariffs have bolstered shipments, exporters warn about rising freight and insurance costs, alongside severe delays near the Strait of Hormuz - a critical supply route that has been nearly blocked for a month and a half.

Negotiations between the U.S. and Iran over the weekend failed but talks could resume this week.

"Exports to the Middle East in March dropped by $3.5 billion... this has impacted goods exports in the month," Rajesh Agrawal, India's trade secretary, told reporters in New Delhi, referring to the impact of Iran war on exports.

India, the world's No. 3 oil consumer, imports more than 80% of its crude oil needs and 60% of its cooking gas, with the Middle East accounting for a large chunk of the supply.

Unlike Japan, South Korea and Taiwan, India depends on Gulf shipping routes to move its products.

Imports of crude oil and related products fell nearly 36% year-on-year to $12.18 billion in March, while gold imports declined 31.6% to $3.06 billion.

Economists had expected the overall trade deficit to widen to $32.75 billion in March, according to a Reuters poll, compared with a deficit of $27.1 billion in February.

India estimates that services exports stood at $35.20 billion in March and imports at $16.96 billion, resulting in a surplus of $18.24 billion, according to a Reuters calculations.

PATH TO US TRADE PACT

India aims to finalise an interim trade deal with the U.S. in the coming months, a trade ministry official said, seeking tariff terms that preserve an edge over peers.

An Indian negotiating team will visit the U.S. from April 20, with in-person talks resuming after a three-four month gap following virtual engagements, another official said.

The parties will work to finalise the legal framework and timelines, while addressing issues arising from ongoing U.S. trade investigations, the official said.

Both officials spoke on the condition of anonymity as details of the bilateral discussions are not public.

An interim trade pact framework to cut U.S. tariffs on Indian goods to about 18% has been clouded by the Supreme Court ruling, though talks continue.

New Delhi hopes to align the trade deal with Washington’s planned changes to the so-called Section 301 tariffs in June that could reset duties on key sectors and shape market access.

For the fiscal year ended March, India's total goods and services exports rose 4.22% to $860.09 billion, the trade ministry said, while imports grew 6.36% to $978.40 billion - widening the overall trade deficit to $119.3 billion from $94.66 billion in the previous year.

(Reporting by Shivangi Acharya and Manoj Kumar; Editing by Mrigank Dhaniwala)