India May See Relief in Record Trade Deficit as Oil Prices Ease, Trade Deals Expand

New Delhi, India | April 21, 2026

India could see relief from its record-high trade deficit in the coming months as easing crude oil prices and new trade agreements begin to improve the country’s external balance, according to a report by Bank of Baroda.

The report noted that India’s trade deficit surged to a record $333.3 billion in FY 2025–26, largely driven by a sharp increase in imports of gold and silver. However, improving global conditions and policy support could help narrow the gap going forward.

📊 Trade Deficit Hits Record High

India’s merchandise exports stood at $441.7 billion, registering a modest 0.9% growth, while imports rose significantly to $775 billion, up from $721 billion in the previous fiscal year.

📈 Key Trade Data (FY 2025–26)

Despite the widening goods trade gap, growth in services exports helped limit the overall trade deficit (goods + services) to $119.3 billion, compared to $94.7 billion in FY 2024–25.

🛢️ Oil Price Trends Offer Hope

The report highlighted that crude oil imports declined by 6.5%, even as global oil prices saw volatility due to geopolitical tensions, particularly in West Asia.

A temporary spike in oil prices—triggered by disruptions such as the Strait of Hormuz tensions—pushed prices up by as much as 58%. However, a year-on-year decline of around 1% in crude prices between April and February helped limit the overall import bill.

If oil prices continue to soften, India’s import costs could decline further, easing pressure on the trade deficit.

🌍 Trade Deals and Global Stability Key to Outlook

The report emphasized that India’s economic fundamentals remain stable, despite global uncertainties. As geopolitical tensions ease and new trade agreements with partner countries take effect, India’s export performance is expected to improve.

Lower commodity prices, combined with stronger exports, could significantly reduce the trade gap in the coming quarters.

⚠️ Gold, Silver Imports Remain a Concern

A major contributor to the widening deficit has been the surge in precious metal imports:

• Gold imports rose 26% in FY 2025–26 (after a 27% jump the previous year)
• Silver imports surged 151%, reversing a decline seen in FY 2024–25

These increases have added substantial pressure on the import bill.

🌐 Rising Imports from China and the U.S.

Imports from key trading partners also saw notable growth:

• Imports from China increased to 16% growth, up from 11.5%
• Imports from the U.S. rose to 15.9%, compared to 8.1% earlier

📉 Current Account Outlook

The government estimates India’s current account deficit (CAD) for FY 2026–27 to remain between 1.5% and 2% of GDP, assuming stable global conditions.

However, the report cautioned that persistent geopolitical risks or rising commodity prices could increase pressure on the external account.