India’s merchandise exports rose 6.7% to $35.1 billion in August aided by a low base, while imports declined by 10.12% to $61.59 billion, causing fears of a slump in domestic economic activity.
The two-way flows precipitated a trade deficit of $26.5 billion in the month, higher than the average of $23.7 billion in April-July, but still far lower than $35.64 witnessed in the year-ago month.
In April-August, goods exports registered a modest growth of 2.52%.
US Tariffs Cast a Shadow
Growth in exports to the US, the largest destination, slowed to a nine-month low of 7.2% in August, but was still faster than the overall shipments. In January-July, exports to the US grew by a quarter, partly due to hurried activities among exporters from various sectors to execute orders before the additional tariffs took effect.
Since August 27, shipments to the US have been subject to a 50% tariff, including a 25% penalty linked to India’s import of oil from Russia.
Commerce secretary Sunil Barthwal said despite the global headwinds and trade policy uncertainties, India’s exporters have done “extremely well.”
The penalty is likely to drive down exports to the US materially in September 2025, which should lead to a sharp dip in overall exports, while also pushing up the trade deficit in the month, said Aditi Nayar, chief economist at Icra. She noted that the non-gold merchandise trade deficit moderated to $21 billion in August 2025 from $23 billion in August 2024, driven by higher exports and lower non-oil non-gold imports.
Electronics, Pharma Drive Export Growth
The cumulative non-petroleum exports in April-August 2025 valued at $158.07 billion, an increase of 7.35% on year. Non-petroleum and non-gems & jewellery exports in April-August were $146.71 billion, compared to $136.13 billion in the year ago period. These figures are important as value addition is relatively low in petroleum and gems & jewellery sectors, which are import-intensive.
Major drivers of exports growth in August include electronic goods (25.93%), engineering goods (4.91%), gems & jewellery (15.57%), petroleum products (6.5%0 and drugs & pharmaceuticals (6.94%).
Total exports (merchandise and services combined) for August 2025 were $ 69.16 Billion, up 9.34% on year. Total imports (merchandise and services combined) for the month came in at $ 79.04 billion, down 7% on year.
The commerce ministry said in a release: “the estimated value of service exports during April-August 2025 is $165.22 billion as compared to $ 149.43 billion in April-August 2024. The estimated value of service imports during April-August 2025 is $ 84.25 billion as compared to $ 81.18 billion in April-August 2024.
The services trade surplus for April-August 2025 is $ 80.97 billion as compared to $ 68.25 billion in April-August 2024.”