India’s goods exports surged 26% in August to narrow trade deficit

India’s merchandise exports surged by more than 26% in August, outstripping import growth and narrowing the monthly trade deficit to a five-month low of $26.9 billion.

The spike pushed goods exports to $43.8 billion, a $9.1 billion increase compared to the same month last year. Crucially, imports grew at a slower pace of 14% to $70.7 billion, representing an absolute increase of $8.7 billion. Commerce Secretary Rajesh Agrawal said this is the first time India has recorded an absolute value increase in exports that is higher than the growth in imports.

What drove the export surge

The recovery was led by a massive 90% jump in electronics exports, alongside a 63% increase in petroleum shipments and a 25% rise in engineering goods.

At the same time, gold imports fell by nearly 58% to $2.3 billion, down from $5.4 billion in August last year. The sharp drop in bullion shipments follows a policy shift in May, when Prime Minister Narendra Modi urged citizens to postpone gold purchases and the government raised customs duties on precious metals to 15% to conserve foreign exchange.

Indian goods also found strong demand in key global markets. Shipments to the US rose by 21.8% to $8.4 billion, despite Washington imposing an extra 10% tariff on Indian goods in late July. Exports to China jumped 52.4% to $1.9 billion, while shipments to Singapore soared by 161% to reach $1.9 billion. However, exports to the UAE fell by 26% to $2.4 billion, a drop the commerce ministry linked to ongoing disruption in West Asia.

Volume versus value

Responding to questions about whether the export growth was merely driven by a weaker rupee, Agrawal said granular data showed healthy growth in physical volume rather than just higher prices. Out of 168 principal commodities India exports, 68 grew in both volume and value, while another 39 grew in value terms alone.

The government has attributed the broader export momentum to trade diversification and a series of free-trade agreements.

Some sectors are already seeing the benefits of these deals. For instance, leather and footwear exporters are targeting $5.5 billion in shipments this fiscal year, up from $4.9 billion last year, helped by a trade pact with the UK that came into force on 15 July. Ramesh Kumar Juneja, chairman of the Council for Leather Exports, said the deal gives Indian leather products zero-duty access to the British market, with a similar agreement with the European Union expected to follow.

The wider trade picture

When services are factored in, India's overall exports for August reached $82.7 billion, up 25.4%, while overall imports grew 18.7% to $92.1 billion. This left the total trade deficit at $9.4 billion, down from $11.6 billion in the same month last year.

Despite the August improvement, the cumulative trade gap for the first five months of the fiscal year remains higher than last year. Between April and August, the goods trade deficit stood at $147.1 billion, compared with $123.9 billion in the same period last year. Agrawal said this was driven by robust domestic economic expansion, which has kept demand high for manufacturing inputs and energy.