India’s merchandise trade deficit widened sharply in January 2026 as a significant surge in gold imports pushed overall inbound shipments to their highest monthly level in recent months, according to provisional trade data released by the government.
Imports Jump Nearly 19% on Gold Buying Spree
Merchandise imports rose 19 percent year-on-year to USD 71.24 billion in January, driven largely by a spike in gold purchases. Gold imports alone stood at USD 12.07 billion during the month, a steep jump from USD 4.13 billion recorded in December.
Economists attributed the rise in gold imports to a combination of seasonal demand, price volatility in global markets, and expectations around interest rate movements. The surge significantly widened the merchandise trade gap for the month, despite relatively stable non-oil, non-gold imports.
Exports Show Modest Growth Amid Global Uncertainty
Merchandise exports grew marginally by 0.6 percent year-on-year to USD 36.56 billion. While the growth was modest, officials noted resilience in key export categories such as engineering goods, petroleum products, pharmaceuticals, and chemicals.
Global demand conditions remain uneven, with geopolitical tensions and slower growth in major economies continuing to weigh on export momentum. However, policymakers maintained that India’s export basket has become more diversified, helping cushion external shocks.
Services Sector Provides Strong Counterbalance
A sharp rise in services exports helped offset the widening merchandise deficit. Services exports surged 26 percent year-on-year to USD 43.90 billion in January, led by strong performance in IT services, business consulting, financial services, and travel-related receipts.
When services trade is included, India’s overall trade deficit narrowed significantly to USD 10.38 billion, highlighting the growing importance of the services sector in stabilizing the country’s external accounts.
Overall Exports Maintain Double-Digit Growth
Combined exports of goods and services rose 13 percent year-on-year in January, reflecting steady demand for Indian services and select manufacturing segments. Officials emphasized that this broader export growth trend remains encouraging despite month-to-month volatility in merchandise trade.
According to commerce ministry projections, India is on track to record total exports exceeding USD 410 billion for the full financial year, supported by sustained momentum in services and gradual recovery in global goods demand.
Outlook: Seasonal Pressures, Structural Strength
Trade analysts cautioned that gold imports could remain volatile in the coming months, particularly amid global economic uncertainty and fluctuating commodity prices. However, they also pointed out that India’s external sector fundamentals remain relatively strong.
“With services exports accelerating and core merchandise categories holding up, the broader trade picture remains manageable,” an official source said, adding that policy focus will continue on boosting manufacturing exports and reducing import dependence over the medium term.
As global conditions evolve, India’s ability to balance merchandise pressures with services-led growth is expected to remain a key factor in managing its trade deficit in 2026.
