How has the 50% tariff shock impacted the export-import dynamics across India? India’s export momentum stayed firm in August while imports declined, helping narrow the country’s trade deficit, as per a report by Crisil. The report highlights that the Merchandise exports rose 6.7% year-on-year to $35.1 billion, while imports fell 10.1% to $61.59 billion. This brought the trade deficit down to $26.49 billion, compared to $35.64 billion a year earlier.
Tariffs pressure: Shipments to US fall to $6.9 billion in August
The 50 per cent tariff on India, which came into effect from Aug 27, has impacted the countries import to US. According to Crisil data, exports to the United States declined to to $6.9 billion in August from $8 billion in July. Though it is a 7.2% rise on year. Crisil noted that “the September data will likely show more impact.”
However, Non-US markets provided some cushion, with exports to other destinations rising 6.6% year-on-year, faster than July’s 4.3%.
Textile exports contract under tariff pressure
Engineering exports rose 4.9% and pharmaceuticals 6.9%, but textile exports contracted under tariff pressure. Electronics exports surged 25.9%, while agricultural exports gained across rice, meat, and dairy products.
India’s imports slump on weak gold demand
The report highlighted that Imports dropped mainly because of a 51.2% plunge in gems and jewellery as gold demand cooled. Gems and jewellery exports was slower than July’s 28.9% though it climbed 15.6% on year.
Core imports slipped 0.9%, ending a 16-month rising trend. Oil imports grew 9.3% on a low base even as Brent crude averaged $68.2 a barrel, down 15.7% from a year earlier.
Oil exports, which had slipped for three straight months, rebounded 6.7%. Core exports, excluding oil and gems and jewellery, grew 6.1%, down from July’s 12.7%.
Services surplus provides support
India’s services exports grew 10.3% in July, while services imports increased 8.5%. This lifted the services trade surplus to $16.4 billion, up from $14.6 billion a year earlier.
Crisil says Current Account Deficit manageable
Crisil remains positive on the country’s external balance despite global headwinds. “India’s current account deficit is expected to remain manageable at about 1% of GDP this fiscal, supported by strong services trade, remittances and softer crude oil prices,” the agency said.
However, it warned of global challenges ahead. World growth is projected to slow to 2.9% in 2025 from 3.3% in 2024, while US growth may ease to 1.7% from 2.8%. The World Trade Organization expects global merchandise trade volumes to fall 0.2% this year.
Crisil noted that August’s trade numbers offer a “healthy print” but cautioned that rising tariffs and slowing global growth could weigh on export momentum in the coming months.