India’s August trade data by the Commerce and Industry Ministry must come as a respite for the Central government, as it faces demands ranging from interest subvention to loan repayment moratoriums from labour-intensive sectors such as seafood and textiles and apparels. But there is no telling how long this respite will last, as it largely depends on the trajectory of the renewed trade negotiations between India, and its largest trading partner, the United States, amid America’s punishing 50% tariffs on imports applicable from August 27. Goods exports in August rose 6.7% year-on-year (YoY) to $35.10 billion, while imports declined by 10.12% to $61.59 billion, led by steep falls in inward shipments of gold (-57% YoY) and silver (-60% YoY). As a result, merchandise trade deficit narrowed to $26.49 billion in August from July’s $27.35 billion. But the strains of the U.S.’s 25% “reciprocal tariffs”, that kicked in on August 7, show in the sequential drop in exports. Goods exports in August to the U.S. dropped to $6.86 billion from $8.01 billion in July, while overall exports shrunk to $35.10 billion in August from $37.24 billion in July and $35.14 billion in June. This suggests that the scramble for stockpiling by American importers has begun to slow and the full effects of the 50% tariffs will reflect in September’s trade data. While U.S. shipments in electronics, gem and jewellery and engineering goods saw mild declines in August, textiles witnessed the sharpest fall of about 2.7% YoY. To be sure, these sectors witnessed impressive YoY overall growth. Not surprisingly, drugs and pharmaceuticals, a sector that is exempt from the tariffs, have done well sequentially and on-year, with exports growing 6.94% YoY to $2.51 billion in August.
What is worrying is the sharp decline in imports across products and sectors — transport equipment (-26.54%), coal and allied products (-26.2%), wood and allied products (-14.46%) and iron and steel (-10.98%). This suggests either a slowing in economic activity, or an attempt to find cheaper domestic suppliers in the wake of tariff-related price pressures. Lower merchandise imports might be good for the deficit, but a sudden decrease such as this is alarming. What is also telling is that despite strained diplomatic relations between India and China, Beijing remains a top trading nation for India. That China remains a main source of imports (grew by 10.19%, April-August) shows that diplomacy and economic relations are far removed from each other.
Published – September 17, 2025 12:10 am IST
