India’s trade deficit to remain manageable, US deal crucial factor: Report

New Delhi: India’s trade deficit is likely to remain manageable, as exports to other Asian partners such as China, Hong Kong and South Korea have been higher than last year, both in terms of growth as well as a proportion of total exports, according to a new report.

Similarly, exports to European countries such as Spain and Germany too have shown significant traction this year. This is a huge positive and should support exports growth in the rest of the year as well, according to Aditi Gupta, Economist, Bank of Baroda (BoB).

In terms of invisibles, the position is expected to remain largely steady. This suggests that India’s current account deficit is expected to remain largely in check at 1.2-1.5 per cent of the GDP in FY26. Progress on US-India trade talks will be a crucial factor to monitor going forward,” Gupta mentioned.

Gold imports are likely to be higher in H2 due to seasonal demand. However, some respite is likely to come from lower oil prices which are expected to remain at current levels, amidst expectations of oversupply.

“Export growth has also held up well, with signs of possible diversification to other markets,” according to the BoB report.

India’s export growth remained resolute at 6.8 per cent in September, compared with a decline of 1 per cent in September 2024, supported largely by a continued acceleration in electronics exports.

Import growth decelerated as gold and oil imports were lower. On a positive note, non-oil-non-gold imports have shown traction this year.

India’s merchandise exports have increased by 3 per cent in FY26 to date compared with an increase of 1.2 per cent in the same period last year.

In comparison, import growth has been lower this year at 4.5 per cent compared with 9 per cent in FYTD25. On the services side, services exports rose at a lower rate of 5.2 per cent this year, after increasing by 12 per cent in the same period last year.

However, a decline in services imports helped to cushion the impact on services balance, said the report.

IANS