India's Trade Gap Shrinks As Rise In Exports To US Offsets Iran War Hit

India's merchandise trade deficit unexpectedly narrowed in March as a surge in exports to the US helped cushion the impact of the ongoing Iran war that has disrupted shipping routes and inflated energy costs. Follow Live Updates

The deficit fell to a nine-month low of $20.67 billion, with exports rising to $38.92 billion in March from $36.61 billion in the previous month and imports falling to $59.59 billion from $63.71 billion, data from the trade ministry showed on Wednesday.

Exports to the US rose 17.4 per cent month-on-month to $8.02 billion, supported by a cut in tariffs to 10 per cent following a US Supreme Court ruling. This has helped boost shipments of textiles and engineering goods to India's largest export market that had imposed tariffs of up to 50 per cent on a wide swath of goods.

The trade data underscore the opposing forces shaping India's export outlook: supply disruptions and surging logistics costs stemming from the Iran conflict and a partial revival in US demand.

While lower tariffs have bolstered shipments, exporters warn about rising freight and insurance costs, alongside severe delays near the Strait of Hormuz - a critical supply route that has been nearly blocked for a month and a half.

Negotiations between the US and Iran over the weekend failed but talks could resume this week.

"Exports to the Middle East in March dropped by $3.5 billion... this has impacted goods exports in the month," Rajesh Agrawal, India's trade secretary, told reporters in New Delhi, referring to the impact of Iran war on exports.

India, the world's No. 3 oil consumer, imports more than 80 per cent of its crude oil needs and 60 per cent of its cooking gas, with the Middle East accounting for a large chunk of the supply.

Unlike Japan, South Korea and Taiwan, India depends on Gulf shipping routes to move its products. Imports of crude oil and related products fell nearly 36 per cent year-on-year to $12.18 billion in March, while gold imports declined 31.6 per cent to $3.06 billion.

Economists had expected the overall trade deficit to widen to $32.75 billion in March, according to a Reuters poll, compared with a deficit of $27.1 billion in February.

India estimates that services exports stood at $35.20 billion in March and imports at $16.96 billion, resulting in a surplus of $18.24 billion, according to a Reuters calculations.

India aims to finalise an interim trade deal with the US in the coming months, a trade ministry official said, seeking tariff terms that preserve an edge over peers.

An Indian negotiating team will visit the US from April 20, with in-person talks resuming after a three-four month gap following virtual engagements, another official said.

The parties will work to finalise the legal framework and timelines, while addressing issues arising from ongoing US trade investigations, the official said.

Both officials spoke on the condition of anonymity as details of the bilateral discussions are not public. An interim trade pact framework to cut US tariffs on Indian goods to about 18 per cent has been clouded by the Supreme Court ruling, though talks continue.

New Delhi hopes to align the trade deal with Washington's planned changes to the so-called Section 301 tariffs in June that could reset duties on key sectors and shape market access.

For the fiscal year ended March, India's total goods and services exports rose 4.22 per cent to $860.09 billion, the trade ministry said, while imports grew 6.36 per cent to $978.40 billion - widening the overall trade deficit to $119.3 billion from $94.66 billion in the previous year.

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