Sequentially, goods exports slowed from $44.24 billion in July and the trade deficit shrank from $31.98 billion. The trade deficit in August last year was $27.22 billion.
“Surging imports have led to a higher trade deficit in the first five months of this fiscal year, driven by strong domestic economic growth, rising energy needs and demand for critical inputs,” said Rajesh Agrawal, commerce secretary. Exports are maintaining positive momentum, fuelled by such as engineering, petroleum products, chemicals, and textiles, he said.
Gold inflow nearly halved to $2.3 billion from $4.16 billion in July, which helped cut total imports to $70.67 billion from $76.22 billion in July. In August last year, total imports were $61.96 billion. Agrawal said India’s earlier large trade deficits were partly driven by strong domestic demand, while the government is continuing efforts to diversify export markets through trade agreements and other measures.
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Trade with West Asia suffered in the first half of the year and a dip in overall trade with West Asia was reflected in the data. On local currency trade, he said banking channels and other processes need to be put in place. Vostro accounts and related infrastructure will need to be expanded for local currency trade between BRICS countries.
The US continued to be India’s largest export destination. India’s shipments to the US reached $42.79 billion in the April-August period.SC Ralhan, president of the Federation of Indian Export Organisations, highlighted the broadening of India’s export markets and diversification, which indicates that exporters are increasingly leveraging new and emerging opportunities while strengthening their presence in traditional areas. On rupee depreciation, he said exports have jumped in both rupee and dollar terms.
Carbon measures
India is seeking the EU’s approval for its national accreditation body and local verification agencies under the bloc’s Carbon Border Adjustment Mechanism (CBAM) as the government works with exporters to prepare them for reporting requirements. Actual returns have to be filed by September 2027 for the mechanism. Officials said Indian verification bodies have applied for accreditation with the EU and the government expects some of them to be approved. The commerce and industry ministry has setup a Committee on Export Preparedness for EU CBAM comprising government officials, regulators and industry bodies, and has taken up the issue of steel emission data with the steel ministry.
India is also engaging with the EU on recognition of the National Accreditation Board for Certification Bodies (NABCB), which accredits certification and verification bodies in the country, to have Indian verifiers recognised by the EU. That’s aimed at making compliance easier for domestic exporters.
An official said that upstream producers have requested a mechanism for accounting of embedded emissions
The NABCB has consulted prospective verifiers from the EU. Discussions are underway on an MoU with the EU-recognised accreditation body that will support NABCB recognition in future. India has already secured recognition from the UK.
FTA progress
Commerce and industry minister Piyush Goyal will visit the US at the end of this month to participate in the G20 trade ministerial in Milwaukee and is expected to hold a bilateral meeting with US Trade Representative Jamieson Greer, Agrawal said. “We expect during the visit, definitely there will be bilateral meetings between the ministers… bilateral is in the offing,” he said.
The two-day ministerial will begin on September 30 under the US’ G20 presidency. “Whenever the bilateral takes place, I think all issues, trade issues between India and the US, will be discussed. And even the ongoing FTA (free trade agreement) negotiations and the way forward on that will definitely be on the agenda for discussion,” Agrawal said.
The India-New Zealand FTA is likely to come into force late next month, with official dates to be announced shortly, he said. The two countries signed the FTA on April 27, providing duty-free access to 100% of India’s exports to New Zealand.
“We are expecting that the agreement will get operationalised in the latter half of October 2026. The exact date for the same will be announced soon… because both sides have to completely take stock of the operationalisation processes and procedures,” he said. The agreement is expected to come into force from October 19, according to officials.
On the India-EU FTA, Agrawal said it’s progressing as per schedule with the pact expected to advance toward signing after necessary approvals by the EU Council. Following this, the pact will move to the European parliament for approval, which is also expected to take place soon.
The pact is expected to be signed by the end of this year.
Agrawal described the pace at which the European Union has moved on the trade agreement as the “fastest” he has seen for an FTA.
With Canada, the fourth round of FTA negotiations are ongoing in New Delhi, with about 50 Canadian officials participating in the talks. Negotiations on two chapters have been concluded, while discussions on all chapters are continuing.