India’s merchandise export declined for the third consecutive month, by 2.4% year-on-year to $36.4 billion in January 2025. This was primarily due to a decline in oil exports. Merchandise imports increased by 10.3% year-on-year to $59.4 billion in January, driven by strong growth in core imports and gems and jewellery imports. Gold imports also increased at a slower pace than the previous month. The merchandise trade deficit widened to $23 billion in January compared to $21.9 billion in the previous month and $16.6 billion from the previous year. This has contributed to the consistently depreciating rupee value of 86.3 per dollar in January.

However, service exports had an uptick, and service imports moderated down. Service exports grew year-on-year by 16.5% and service imports decreased by 13.8%. Consequently, the service trade surplus was $19.1 billion in December.

Merchandise exports grew 1.4% to $358.9 billion for the first three quarters of the current fiscal year, furthermore, merchandise imports grew faster at 7.4% to $601.9 billion. So, the cumulative trade deficit for the April -January period of the current fiscal year is $243 billion compared to the $206.3 billion for the same period.

Exports of agricultural products like meat, dairy, and poultry products increased while cashews, fruits and vegetables, marine products and rice exports weakened. Labour-intensive products such as carpets, cotton yarn, fabrics and made-ups, leather and leather products, ceramic products glassware and handicrafts also showed strong growth.

Non-oil exports grew 14.5% owing to the 15.9% increase in gems and jewelry exports. Core exports.

Pearl and precious and semi-precious stones as well as gold imports declined while oil imports also contracted. While electrical and non-electrical machinery imports rose, indicating increased capex investment.

Even though the surplus in service trade provides some comfort, the high merchandise trade deficit is alarming. According to a projection by CRISIL Current Account Deficit stands at 1% of the GDP in fiscal year 2025. The report predicts volatility in trade throughout the year, with geopolitical uncertainties such as potential tariff hikes combined with an expected slowdown in the Chinese economy could lead to aggressive exports from China to South Asian markets including India. Thus posing a serious risk to India's export growth.