India’s exports contract 2.38 pc in Jan; trade deficit widens to $22.99 billion

India’s merchandise exports saw a dip of 2.38 per cent in January 2025, totalling $36.43 billion, compared to $37.32 billion in the same month the previous year, as per the data released by the government on Monday, 17 February.

Imports, however, surged by 10.28 per cent to reach $59.42 billion in January 2025, up from $53.88 billion in January 2024. This has resulted in a widening trade deficit, which stood at $22.99 billion for the month, a Reuters calculation based on the official data. Economists had predicted a trade deficit of $22.35 billion for the period.

Merchandise exports also saw a month-on-month decline. In December 2024, exports had stood at $38.01 billion. Similarly, imports showed a slight decrease compared to December's $59.95 billion.

On the services front, exports in January 2025 were valued at $38.55 billion, a notable increase from $32.66 billion in December 2024. Imports of services also rose slightly, amounting to $18.22 billion compared to $17.50 billion the previous month.

The latest trade data paints a mixed picture of India's trading performance. While traditional export markets like the United States and the United Arab Emirates (UAE) continue to play a significant role, India has expanded its export footprint, increasingly tapping into markets such as Bangladesh, Indonesia, and the Netherlands.

In fact, over 17 per cent of India’s goods exports in 2022-23 were directed to the United States, with newer markets emerging as growth areas.

On the import side, China remains a dominant supplier, but the share of imports from Russia has been rising, especially since the Russian invasion of Ukraine. This shift highlights India's strategic pivot, particularly with an uptick in crude oil imports from Russia.

In 2022-23, Russia accounted for 6.5 per cent of India’s total merchandise imports, with more than two-thirds of this coming from oil, positioning Russia as the fourth-largest source of imports for India, up from 20th place in 2021-22. India’s oil companies have benefited from favourable deals with Russian suppliers, with Russia meeting 20 per cent of India's crude oil demand last year.

India’s evolving trade landscape also underscores a shift towards more strategic global partnerships. While India has focused heavily on regional agreements in the past, including the South Asian Free Trade Area (SAFTA) and the ASEAN-India Free Trade Agreement (FTA), recent years have seen a renewed emphasis on securing FTAs with developed economies.

Notable agreements have been struck with Australia, the European Free Trade Association (EFTA), and the UAE, reflecting India’s broader push to diversify its trade relations.

The country’s trade policy has evolved from cautiousness towards FTAs in the 2010s to a more proactive approach, with India now focused on securing comprehensive agreements with both Eastern and Western trading partners. This recalibration aims to address untapped markets while strengthening India’s economic resilience in a rapidly changing global environment.