India’s trade deficit widened in January 2025 as exports contracted after a brief recovery, while imports surged, driven by increased machinery imports and gold inflows.
Non-oil exports grew 14.5% year-on-year in January, a notable improvement from the 5% growth recorded in December. This growth was partly fueled by a 15.9% rise in gems and jewellery exports, bouncing back from a 26.5% contraction the previous month. Core exports, excluding oil and gold, also showed varied performance. The pharmaceutical sector surged with a 21.5% growth compared to just 0.6% in December, while electronic goods registered a robust 79% increase, up from 35.1% a month earlier.
However, other key categories such as engineering goods and readymade garments showed signs of moderation, growing at 7.4% and 11.5%, respectively, compared to 8.3% and 12.9% in the preceding month. The chemicals sector remained in a slump, with organic and inorganic chemical exports contracting for the third consecutive month, falling 1.9% in January after a 2.9% decline in December.
Labour-intensive sectors, on the other hand, displayed encouraging growth. Carpets saw an 18% rise compared to 9.1% the previous month, while cotton yarn, fabrics, and made-ups grew 16.4%, up from 12%. Leather and leather products also showed improved performance with 6.4% growth, while ceramic products and glassware rose 10.4%. Handicrafts recorded a significant 19.5% growth, up from 14.9%.
In the agricultural sector, exports of meat, dairy, and poultry products surged by 35.7%, nearly doubling the 17.9% growth seen in December. However, growth slowed in categories like cashews, fruits and vegetables, marine products, and rice. Cashew exports grew by just 6.9%, down from 45.7%, while marine product exports slowed to 8% from 15.8%. Rice exports, though still strong, saw growth ease to 44.6% from 64%.
On the imports front, pearl, precious, and semi-precious stones saw a decline of 29.1%, an improvement over the 42% drop in December. Oil imports also contracted by 13.5%, reversing a 2.2% growth the previous month. Gold imports remained high, although growth eased to 40.8% from 55.4% in December.
Machinery imports reflected a positive shift in capital expenditure activity. Electrical and non-electrical machinery imports surged by 27.8% year-on-year, up significantly from 11.7% in December, signaling increased government spending on infrastructure.
The widening trade deficit underscores the dynamic shifts in India’s export and import patterns, influenced by global demand fluctuations and domestic investment trends. The balance of trade will remain under watch as policymakers navigate these evolving conditions.