India Goods trade deficit narrows in August on lower oil and gold imports

Economics Research 16 September 2026 | 12:31AM IST

India: Goods trade deficit narrows in August on lower oil and gold imports

Bottom line: India’s merchandise trade deficit narrowed by $5.1bn to $26.9bn in Santanu Sengupta | August, driven mainly by lower oil and gold imports. Oil imports declined on lower Goldman Sachs India SPL volumes, while gold imports declined following inventory build-up in July. Non-oil Arjun Varma exports rose by around 1.4% mom s.a., led by engineering goods, while electronics | exports edged down sequentially but remained robust compared to last year’s levels. Goldman Sachs India SPL

By geography, exports to the US declined sequentially but grew by around 22% yoy, while exports to Saudi Arabia and the UAE fell sequentially amid the re-escalation of the Middle East conflict and is now tracking 28% below the pre-conflict levels. Preliminary estimates suggest that the services trade surplus remained unchanged in August, vs. a higher revised estimate for July. Going forward, we expect the impact of higher oil prices on the current account deficit to be somewhat mitigated by robust services exports.

Merchandise exports: +26.1% yoy in August (vs. +19.6% yoy in July)

Merchandise imports: +14.1% yoy in August (vs. +17.5% yoy in July)

Merchandise trade balance: -$26.9bn in August (vs. -$32.0bn in July)

Services exports: +24.6% yoy in August (vs. +13.4% yoy in July, revised higher from +6.4% yoy earlier)

Services imports: +37.4% yoy in August (vs. +19.1% yoy in July, revised higher from +9.5% yoy earlier)

Services trade balance: +$17.5bn in August (vs. +$17.6bn in July, revised higher from +$17.0bn earlier)

n India’s merchandise trade deficit declined by $5.1bn to $26.9bn in August (vs. 32bn in July), due to lower trade deficits in both oil and non-oil trade. The oil trade deficit narrowed by $1.5bn to $9.9bn as oil imports declined by $1.6bn to $16.7bn likely due to lower volume imports from Russia as per media articles. The non-oil trade deficit narrowed by $3.6bn, mainly driven by a decline in gold imports (Exhibit 1). n Overall goods exports remained broadly unchanged at around $44bn in August (+4.1% mom s.a.), but remained strong on a year-over-year (yoy) basis at 26%. Non-oil exports rose by around 1.4% mom s.a., led by engineering goods exports (+1.4% mom s.a., +24.9% yoy). While electronics goods exports edged down

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sequentially, it remained robust on a yoy basis, growing at around 90% yoy. By geography exports to the US declined sequentially but remained robust on a yoy basis growing at around 22%. Meanwhile, exports to Saudi Arabia and the UAE declined both sequentially and on a yoy basis owing to the re-escalation of the Middle-East conflict in August (Exhibit 2). n Goods imports declined by around 7.3% mom s.a. on a broad-based decline across sub-components. Gold imports declined by around 55% mom s.a. following an increase in July on inventory build-up, while non-oil and non-gold imports declined by around 1.1% mom s.a. led by electronic goods imports (-3.2% mom s.a., +40.5% yoy). n Preliminary estimates show that services trade surplus remained broadly unchanged at $17.5bn (vs. $17.6bn in July, revised higher from $17.0bn earlier), on higher services exports1. n As per the RBI’s July balance of payments (BoP) data, the current account deficit widened to $7.0bn in July from $6.2bn in June, as the goods deficit increased to $31.7bn. This was partly offset by services trade surplus and higher remittance receipts of $13.2bn (vs. $11.9bn in June). Capital flows were more than adequate to finance the current account deficit, with net capital inflows of $27.7bn in July, led by $33.5bn in net non-resident deposit inflows following the FCNR(B) scheme announcement in the June policy meeting. Overall BoP recorded a surplus of $20.8bn in July (vs. +$2.9bn in June).

Exhibit 1: Goods trade deficit narrowed in August mainly driven by lower oil trade deficit and gold imports

USD Bn USD Bn Trade Balance: Oil -35 Trade Balance…