Jan-25 trade deficit surges to $23 Billion as exports decelerate

18 Feb 2025 , 09:57 AM

INDIA JANUARY 2025 TRADE – RAPID DATA CHECK

For January 2025, merchandise trade deficit widened to $23 Billion with higher deficit driven by weak exports coupled with a weak rupee. The good news is that gold imports continued to be subdued at $2.69 Billion, but imports of industrial metals surged. One must note that the cumulative overall deficit for FY25 is about 27.5% higher yoy. Let us look at the top drivers of the export story for January 2025.

Key contributors to the export basket in Jan-25, in terms of size were Engineering Goods $9.42 Billion (+7.4%), Electronic Products at $4.11 Billion (+79.0%), Petroleum Products $3.56 Billion (-58.7%), Gens & Jewellery $3.00 Billion (+16.0%), Drugs & Pharmaceuticals $2.59 Billion (+21.5%), and Organic & Inorganic Chemicals $2.35 Billion (-2.0%). The key import contributors were crude & petroleum products $13.43 Billion (-13.5%), Electronic Goods $9.36 Billion (+17.8%), Machinery $4.73 Billion (+27.8%), Coal, Coke, Briquettes $2.69 Billion (-15.2%), Gold $2.69 Billion (+40.8%), and Transport Equipment $2.68 Billion (-1.6%).

Top export destinations for January 2025 were United States $8.44 Billion, United Arab Emirates $3.08 Billion, UK $1.17 Billion, Bangladesh $1.08 Billion, China $1.06 Billion, and the Netherlands $1.02 Billion. What where the big sources of imports of goods. For January 2025, top import originating nations were China $10.49 Billion, Russia $4.82 Billion, United Arab Emirates $4.75 Billion, United States $3.58 Billion, Iraq $2.40 Billion, Saudi Arabia $2.12 Billion, and Singapore $2.02 Billion.

HOW MERCHANDISE TRADE EVOLVED IN LAST 1 YEAR

Here is the monthly data of merchandise exports, imports, and trade deficit.

Monthly Data	Exports ($ Billion)	Imports ($ Billion)	Total Trade	Trade Surplus / Deficit
Jan-24	36.92	54.41	91.33	-17.49
Feb-24	41.40	60.11	101.51	-18.71
Mar-24	41.68	57.28	98.96	-15.60
Apr-24	34.99	54.09	89.08	-19.10
May-24	38.13	61.91	100.04	-23.78
Jun-24	35.20	56.18	91.38	-20.98
Jul-24	33.98	57.48	91.46	-23.50
Aug-24	34.71	64.36	99.07	-29.65
Sep-24	34.58	55.36	89.94	-20.78
Oct-24	39.20	66.34	105.54	-27.14
Nov-24	32.03	63.86	95.89	-31.83
Dec-24	38.01	59.95	97.96	-21.94
Jan-25	36.43	59.42	95.85	-22.99

Data Source: DGFT (Jan-25 figures are DGFT revised)

How do trade figures compare with 12-month averages. Over last 12 months, the average merchandise exports stood at $36.74 Billion, while average merchandise imports stood at $59.28 Billion. January 2025 exports are marginally lower while imports are marginally higher than the 1-year average. The average trade deficit in last 12 months stood at $22.54 Billion; with the December 2024 trade deficit at $23 Billion; being slightly higher.

TRADE GAP – EXPORT BOOSTERS AND IMPORT TRIMMERS

Here are star export performers in January 2025, on percentage increase in exports yoy. Cereals (+103.2%), Electronic Goods (+79.0%), Tobacco (+59.2%), Coffee (+57.1%), Rice (+44.6%), Jute (+40.7%), Meat/Dairy/Poultry (+35.7%), Mica/Coal/Ores (+27.7%), Tea (+22.0%), Drugs & Pharma (+21.5%), and Handicrafts (+19.5%) were the key export growth drivers in January 2025.  Major import trimmers in Jan-25 were Project Goods (-48.2%), Pearls (-29.1%), Coal/Coke/Briquettes (-15.2%), and Petroleum Products (-13.5%).

TRADE DATA BREAK-UP FOR JANUARY 2025

Here is a break up of the merchandise and services export and import data and the individual deficit / surplus along with the overall picture.

Macro Variables (Trade Related)	Jan-25 ($ Billion)	Dec-24 ($ Billion)	Jan-24 ($ Billion)	Change YOY (%)
Merchandise Exports	36.43	38.01	37.32	-2.38%
Merchandise Imports	59.42	59.95	53.88	10.28%
Total Merchandise Trade	95.85	97.96	91.20	5.10%
Merchandise Trade Deficit	-22.99	-21.94	-16.56	38.83%
Services Exports	38.55	32.66	31.01	24.31%
Services Imports	18.22	17.50	14.84	22.78%
Total Services Trade	56.77	50.16	45.85	23.82%
Services Trade Surplus	20.33	15.16	16.17	25.73%
Combined Exports	74.98	70.67	68.33	9.73%
Combined  Imports	77.64	77.45	68.72	12.98%
Overall Trade Volume	152.62	148.12	137.05	11.36%
Overall Trade Deficit	-2.66	-6.78	-0.39	582.05%

Data Source: DGFT and RBI

What is the big picture? The overall trade deficit for January 2025 (combining merchandise deficit and services surplus) has reduced sharply from $(6.78) Billion in December to $(2.66) Billion in January. On  yoy basis; the growth in services trade surplus has been lower than the growth in merchandise trade deficit. However, on MOM basis, the reverse is the case; and that has helped overall deficit fall sequentially.

CUMULATIVE TRADE DATA BREAK-UP FOR FY25 (APR-JAN)

Having seen the monthly picture of December 2024, here is a cumulative picture of the first 10 months of FY25.

Macro Variables (Year-to-Date)	FY25 (Apr-Jan)	FY25 (Apr-Dec)	FY24 (Apr-Jan)	Change YOY (%)
Merchandise Exports	358.91	321.71	353.97	1.40%
Merchandise Imports	601.90	532.48	560.27	7.43%
Total Merchandise Trade	960.81	854.19	914.24	5.09%
Merchandise Trade Deficit	-242.99	-210.77	-206.30	17.78%
Services Exports	323.68	280.94	282.71	14.49%
Services Imports	168.17	149.67	146.48	14.81%
Total Services Trade	491.85	430.61	429.19	14.60%
Services Trade Surplus	155.51	131.27	136.23	14.15%
Combined Exports	682.59	602.65	636.68	7.21%
Combined  Imports	770.07	682.15	706.75	8.96%
Overall Trade Volume	1,452.66	1,284.80	1,343.43	8.13%
Overall Trade Deficit	-87.48	-79.50	-70.07	24.85%

Data Source: DGFT and RBI (Trade data in Billion $)

The overall trade deficit (combining merchandise deficit and services surplus) at $(87.48) Billion; is 24.9% higher on a yoy basis. This can be attributed to the trade constraints imposed by the West Asia crisis, blockage of Red Sea shipping routes, and concerns over Trump tariffs. While the overall deficit in FY25 is likely to be wider than FY24, it does not seem to be something to really be concerned about!

CURRENT ACCOUNT DEFICIT OUTLOOK FOR FY25

We have actual data for Q1FY25 and Q2FY25 with the CAD averaging around 1.2% of GDP. However, this is expected to go up in Q3 and Q4, and the Trump tariffs may only worsen the scenario. For now, gold imports are in check and that is the good news. For FY25, the services exports have crossed 90% of the merchandise exports, while the services surplus in FY25 has wiped out nearly 64% of the merchandise trade deficit. For now, it looks like current account deficit (CAD) for FY25 could scale up to 1.3% to 1.4% of GDP. India’s CAD should be a lot more comfortable when the services surplus is able to wipe out 70% of the merchandise trade deficit. The CAD Q3 data will be available towards end of March 2025.