India’s trade deficit widened to $42 bn, the highest ever monthly deficit, hit by US tariffs and impacted by a surge in Gold imports. Services trade cushioned the blow. However, the government’s and RBI relief measures for exporters couldn’t help much, as analysts noted that the timing is unusual. According to analysts, the widening trade deficit could increase pressure on the rupee and the overall external balance.
Gems and jewellery imports jump 174%: Nomura
The merchandise trade deficit rose to $41.7 billion in October, up from $32.2 billion in September. Nomura noted that gems and jewellery imports increased by an unprecedented 174%. Core imports, excluding oil and jewellery, grew at a slower pace of 8.1%.
The surge in gems and jewellery imports, including gold, silver and precious stones, has kept inbound shipments elevated for two straight months.
Services surplus rises to $19.9 bn; IDFC FIRST warns of HIRE Act risk
In contrast to the slump in merchandise exports, services trade continues to be a bright spot. India’s services surplus rose to $19.9 billion in October, supported by steady growth in IT and business services. Export growth has remained strong at 31% so far in FY26, while import growth has slowed, lifting the surplus.
However, a report by IDFC FIRST Bank warns that proposed US legislation, such as the HIRE Act—which seeks to impose a 25% tax on US firms outsourcing jobs abroad—poses a fresh risk to India’s software and BPO exports. India exported $181 billion worth of software services in FY25, with the US accounting for 54% of that, followed by Europe at 30.8%. Of the total software exports, 31% come from IT-enabled services such as BPO and engineering, while 69% are IT or computer services.
“If there is an additional tariff targeting outsourcing, it could add to the downside risk to CAD and GDP growth for India,” the report noted
The report also cautions that higher H-1B visa costs could lower remittances over time, a concern given that the US contributes 27.7% of India’s total inward remittances. On the positive side, outsourcing to India could increase—but only if the HIRE Act is ultimately not implemented.
Trump tariffs bite: Nomura says cumulative US-bound export contraction at 10%
October marks the second month of the 50% Trump tariffs. Nomura highlighted that India’s Exports contracted 11.8% year-on-year in October, reversing the growth seen in September.
Trump tariffs weighed heavily on shipments to the US. Exports of gems and jewellery, leather, textiles, pharmaceuticals, chemicals and engineering goods all dropped. Marine products performed slightly better, while electronic goods continued to stand out as the fastest-growing category.
India’s exports to the US shrank 8.5% in October. The cumulative fall since the tariffs came into effect in September now stands at around 10%.
Government, RBI roll out support measures, Nomura calls timing “curious”
The government and the Reserve Bank of India have announced several measures to help exporters hit by the higher US tariffs. These include a credit guarantee scheme, an export promotion scheme, a moratorium on term loan repayments, and a longer window for repatriating export proceeds. Exporters now get 15 months instead of nine to bring back earnings, and the credit period for export loans has been extended to 450 days.
The government has also restricted imports of certain platinum and silver jewellery categories to curb the deficit.
Nomura said the timing of these announcements is “curious,” especially when expectations of a trade deal with the US had been building. The brokerage noted that “more rounds of negotiations may not be required,” quoting comments from the Indian side, but added that the fate of the deal remains unclear.
Oil imports fall; Russia share dips
The rise in trade deficit came even as oil imports fell by 21.7% due to softer global crude prices.
Nomura said weak merchandise exports and sticky imports will keep monthly trade numbers under pressure in the coming months.
Important to note that the data is coming at a time when India is facing the pressure to reduce the russian oil purchase. According to trade data, Russia accounted for 32% of India’s crude oil imports in FYTD26, down from 38% in FYTD25, as Indian refiners gradually diversified purchases. Recently a day ago on Nov 17, Union Minister for Petroleum and Natural Gas Hardeep Singh Puri announced that Indian public sector oil companies, IOC, BPCL, and HPCL, have signed a one-year deal to import liquefied petroleum gas (LPG) from the United States.
CAD forecast: Nomura FY26 CAD forecast to 1.2% of GDP
Nomura has raised its forecast for India’s FY26 current account deficit by 0.1 percentage points to 1.2% of GDP. The analyst expects monthly trade data to continue reflecting weak exports and firm imports, keeping the trade deficit elevated.
CAD forecast: IDFC FIRST warns of 1.6% risk if tariffs persist
IDFC FIRST Bank has retained its current account deficit estimate at 1.3% of GDP for FY26, assuming India and the US resolve trade tensions by December. If the 50% tariffs continue until March 2026, the analyst expects CAD to widen to 1.6% of GDP.
Pressure on Rupee
IDFC FIRST Bank says the widening deficit and weak merchandise exports are increasing pressure on the rupee and the overall external balance. The Reserve Bank of India (RBI) has recently shifted its strategy to more actively defend the currency. The report says RBI’s intervention helped reduce volatility in the USD-INR pair from October onwards. Net dollar sales through the spot and forward markets rose to $17 billion in October.
The bank expects the rupee to remain range-bound in the coming months as long as a trade deal with the US is finalised soon. It sees the USD-INR at 88.25 by December 2025, gradually moving toward 89.50–90.00 by September 2026.
The report adds that India’s balance of payments is already under pressure, with the country recording a$20 billion deficit in FYTD26 amid weaker foreign portfolio inflows and a higher import bill. The rupee has weakened more than most Asian currencies this year due to outflows and the RBI’s earlier forward-book commitments.
Now all eyes will be on global trade trends including India-US trade deal, global uncertainties and India’s gold import trajectory.