India's export outlook remains uncertain, trade deficit to widen to 1.2% of GDP in FY26: UBI Report

ANI May 19, 2025 209 views

India’s trade deficit is set to widen to 1.2% of GDP in FY26, per UBI’s latest analysis. Surging non-oil, non-gold imports hint at possible dumping in chemicals and electronics. While services exports remain strong, US tariff threats cast a shadow over merchandise trade. The April goods deficit spiked to $26.4B, far exceeding estimates.

"Outlook for exports remains uncertain due to the looming threat of reciprocal tariffs by the US on trading partners" – Union Bank of India
New Delhi, May 19: India's trade outlook for the current financial year remains uncertain due to the looming threat of reciprocal tariffs by the United States, according to a report by Union Bank of India.

Key Points

1

FY26 trade deficit projected at 1.2% GDP vs 0.9% in FY25

2

NONG imports triple amid dumping concerns

3

Services surplus offsets goods deficit at $17.8B

4

US tariff pause fails to ease export uncertainties

The report expected India's current account deficit (CAD) to widen to 1.2 per cent of GDP in FY26, up from an estimated 0.9 per cent in FY25.

It said "We continue to maintain our view of widening in C/A deficit in FY26 to 1.2 per cent in GDP vis-a-vis an estimated 0.9 per cent in FY25. That said, outlook for exports remains uncertain due to the looming threat of reciprocal tariffs by the US on trading partners".

The bank highlighted that even though there is a 90-day pause on the proposed US tariffs, the threat still exists and continues to weigh on the outlook for Indian exports.

Merchandise trade deficit widened significantly to USD 26.42 billion in April 2025, compared to USD 21.54 billion in March 2025. This was much higher than the estimate of around USD 20 billion, and also exceeded the USD 19.19 billion recorded in April 2024.

The report attributed the widening of the trade deficit to a sharp rise in imports amid ongoing trade disruptions. On a month-on-month basis, imports increased by USD 1.4 billion while exports declined by USD 3.5 billion.

Among trade sub-segments, the oil and gold trade deficit narrowed in April 2025 compared to the previous month. However, this was offset by a steep increase in the non-oil non-gold (NONG) trade deficit, which nearly tripled on a monthly basis.

The NONG trade deficit widened by approximately USD 7 billion, with the major contributors being chemicals (42 per cent), machinery (20 per cent), and electronics (10 per cent).

The report suggested that the sharp jump in NONG imports could indicate early signs of dumping-related activity in these sectors, which is impacting trade dynamics.

Despite the widening goods deficit, India's services trade surplus remained strong. The surplus stood at USD 17.8 billion in April 2025, only slightly lower than USD 18.1 billion in March 2025, and significantly higher than the USD 13.4 billion recorded in April 2024.

The strong performance in the services sector is seen as a positive trend, especially in the context of a slowing global economy. According to the report, the services surplus is expected to provide some relief to India's overall current account position in the coming months.

Reader Comments

R
Rajesh K.
This is concerning but not unexpected. Our manufacturing sector needs to become more competitive globally. Instead of relying on services exports alone, we need 'Make in India' to deliver real results. The government should focus on reducing production costs and improving infrastructure.
P
Priya M.
The services surplus is saving us once again! 💪 But we can't keep depending on IT exports forever. The dumping in chemical and electronics sectors is worrying - need stronger anti-dumping measures. Hope the trade negotiators are working overtime on the US tariff issue.
A
Amit S.
Why are we importing so much machinery when we have domestic manufacturers? The 'Atmanirbhar Bharat' initiative seems to be failing in this sector. We need to support local industries better with policies and incentives.
S
Sunita R.
The numbers don't look good, but let's not panic. Our economy has shown resilience before. The services sector is still strong, and that's where India truly shines. Maybe we should focus more on high-value services exports while fixing manufacturing issues.
V
Vikram J.
The US tariff threat is serious. We need better trade diplomacy. Instead of confrontation, we should negotiate win-win deals. Our exports create jobs here - can't afford to lose that. Also, why is gold import still such a big factor in 2025? 🤔
N
Neha P.
As someone working in exports, I can say the ground reality is tougher than these numbers show. Many small exporters are struggling with compliance costs and logistics issues. The government needs to simplify processes and reduce red tape to make Indian goods competitive abroad.

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Tags:
India trade deficit US tariffs current account deficit NONG imports UBI report