India’s trade gap widens in December as imports surge, exports stay resilient

New Delhi: India’s merchandise trade deficit widened in December following a sharp rise in imports, even as demand for Indian goods in the US remained resilient despite steep 50% tariffs imposed on most shipments.

Merchandise exports rose to $38.51 billion in December from $37.80 billion a year ago, while imports surged to $63.55 billion from $58.43 billion, resulting in a deficit of $25.04 billion during the month. Trade gap in November had stood at $24.53 billion and $20.63 billion in December 2024, according to provisional data released by the ministry of commerce and industry on Thursday.

Exports to the US, India’s largest overseas market, rose month-on-month in December, indicating that demand held up despite higher tariffs, even as exporters faced pricing and margin pressures. Bilateral trade between India and China also increased, with imports rising sharply alongside an improvement in exports, reflecting continued dependence on Chinese intermediate and electronic goods.

Analysts said that India’s export performance in December reflected the resilience and adaptability of exporters amid a challenging global environment.

“The steady momentum across key sectors, supported by policy stability and improving market diversification, is encouraging. As global demand conditions gradually stabilise, we remain confident that India’s exporters are well-positioned to sustain growth and enhance competitiveness in the coming months,” said Ajay Sahai, director general of Federation of Indian Export Organisations (FIEO).

India’s total merchandise exports during April–December 2025 (FY26) rose to $330.29 billion, up from $322.41 billion a year ago. Imports increased to $578.61 billion during the first nine months of the current fiscal, leading to a goods trade deficit of $248.3 billion.

Rise despite tariffs

Exports to the US in December rose to $7.01 billion from $6.98 billion in November despite stiff tariffs. Shipments in the first nine months (April–December) of the current fiscal year also rose about 10% to $65.88 billion. Bilateral goods trade between India and the US stood at $105.31 billion during April-December, with India recording a trade surplus of $26.45 billion. This compares with bilateral trade of $94.97 billion in the corresponding period of the previous fiscal, when the trade surplus stood at $25.09 billion.

In contrast, trade with China remained heavily skewed against India. India's goods shipments to China moderated to $2.05 billion in December from $2.20 billion a month prior. Exports had stood at $1.22 billion a year earlier. India's bilateral merchandise trade with China reached $110.2 billion in the April–December period of the current fiscal, with a trade deficit of $81.7 billion. Exports to China climbed to $14.25 billion, up from $10.42 billion a year earlier.

“Export growth in spite of a challenging external environment is a positive sign, but global uncertainty remains high. We should ramp up our efforts to deregulate and increase the global competitiveness of Indian goods and services, since this is the only aspect in our control,” said Rahul Ahluwalia, founder and director of Foundation for Economic Development, a policy advocacy think tank.

The combined merchandise and services trade position deteriorated in December from a year earlier. Total exports (goods and services) slipped marginally to $74.01 billion last month from $74.77 billion in December 2024, while total imports jumped to $80.94 billion from $76.23 billion. Services exports eased to $35.50 billion from $36.97 billion, while services imports declined marginally to $17.38 billion from $17.80 billion.

Major drivers of merchandise exports growth during December included electronic goods, meat, dairy & poultry products, drugs & pharmaceuticals, engineering goods and marine products.

Electronic goods exports jumped 16.78% yerar-on-year to $4.17 billion in December, while drugs and pharmaceuticals shipments rose 5.65% $2.63 billion. Engineering goods exports increased by 1.3% to $10.98 billion.

A. Sakthivel, chairman of the Apparel Export Promotion Council (AEPC), said that demand in key international markets such as the US has remained uneven amid inflationary pressures and geopolitical uncertainties, but Indian apparel exporters have managed to hold their ground through product diversification, stronger compliance and a greater focus on value-added segments. He said exporters are now moving beyond basic categories and strengthening design and sourcing capabilities to remain competitive.

“Looking ahead, we are cautiously optimistic about the growth prospects of India’s RMG (read-made garments) exports this year. As global demand improves gradually, India is well placed to gain market share, supported by a reliable supply chain, adherence to compliance standards and growing design capabilities,” Sakthivel said.

Engineering goods drives

The single biggest driver of export growth during the year continued to be engineering goods, with cumulative exports rising to $90.73 billion for April-December 2025 from $87.34 billion in the year-earlier period, reflecting sustained overseas demand for machinery, transport equipment and auto components.

Electronic goods exports recorded a sharp jump to $35.27 billion during April-December from $26.11 billion a year earlier. Experts said the rise is clearly capacity- and investment-led, driven by mobile phone and electronics manufacturing, making it a structural trend rather than a one-off spike.

Gems and jewellery exports edged down to $21.22 billion from $21.39 billion in the April-December period, indicating that while monthly movements may vary, overall exports remain largely flat and driven by price and inventory cycles rather than volume growth.

The trade data underlined the diverging roles played by the US and China in India’s external trade, with the US consolidating its position as India’s largest export destination while China remains the dominant source of imports.

The UAE emerged as a key trade partner, with exports rising to $28.92 billion from $26.90 billion, while imports increased to $49.55 billion from $45.77 billion, largely due to energy and precious metal flows.

Imports from Russia moderated to $44.98 billion from $49.65 billion, reflecting lower crude purchases, while exports to European markets such as the Netherlands and Germany showed mixed trends. Among the Asian markets, exports to Bangladesh and Hong Kong posted gains, while imports from Singapore and Japan increased.