India’s merchandise trade deficit widened to a three month high of 34.68 billion dollars in January 2026, according to data released by the Commerce Ministry on Monday February 16, 2026. The widening gap between imports and exports came in the final month affected by a steep United States tariff regime on Indian goods, which officials said is set to be reduced this week.

The larger than expected deficit was driven primarily by a sharp surge in imports of gold and silver, which pushed total imports higher even as exports declined during the month.

The January numbers are being closely watched as India prepares for a key trade negotiation round with the United States aimed at easing tariff pressures and strengthening bilateral trade ties.

Trade deficit at three month high

The trade deficit, which measures the difference between imports and exports of goods, rose to 34.68 billion dollars in January, marking the highest level in three months.

In simple terms, the deficit indicates that India imported significantly more goods than it exported during the month.

A rising trade deficit can put pressure on the country’s current account balance and currency if sustained over a longer period.

Surge in imports

According to official data, total imports increased 12 percent month on month to 71.24 billion dollars in January.

The increase was largely driven by higher imports of precious metals, particularly gold and silver.

India is one of the world’s largest importers of gold. Demand typically rises during wedding seasons and festive periods, as well as when global prices fluctuate.

A sharp increase in gold and silver imports tends to inflate the import bill significantly because these commodities are high value items.

Apart from precious metals, other categories such as electronics, machinery and petroleum products also contribute to the overall import basket.

Exports decline

While imports surged, exports fell 5 percent to 36.56 billion dollars in January.

The decline in exports added to the widening deficit.

Export performance can be influenced by global demand conditions, exchange rate movements and trade policies.

The January data suggests that exporters faced challenges during the month, possibly due to global economic uncertainty and tariff related pressures.

Impact of US tariffs

January marked the final month affected by an approximately 50 percent US tariff on certain Indian exports.

Government officials have indicated that this tariff will be reduced to 18 percent this week, providing relief to Indian exporters.

The high tariff had made Indian goods less competitive in the US market, which is one of India’s largest trading partners.

With the expected reduction in tariffs, exporters are hopeful that demand from the US market will improve in the coming months.

Trade talks with the United States

A trade delegation from India is scheduled to travel to Washington next week to finalise a trade agreement.

Rajesh Agrawal, India’s Trade Secretary, has indicated that discussions will focus on resolving outstanding issues and strengthening market access.

The upcoming talks are seen as an important step toward improving bilateral trade relations.

A reduction in tariffs could help boost Indian exports, especially in sectors such as textiles, engineering goods, pharmaceuticals and chemicals.

Gold imports drive deficit

The sharp rise in gold imports played a central role in pushing the trade deficit higher.

Gold imports are often volatile and can change significantly from month to month.

Higher gold prices or increased domestic demand can lead to spikes in imports.

While gold imports support domestic consumption and investment demand, they also widen the trade gap because India imports most of its gold requirements.

Broader trade dynamics

India’s trade performance reflects both domestic and global factors.

Global economic growth has remained uneven, affecting demand for exports.

At the same time, domestic demand for certain goods, including electronics and precious metals, has remained strong.

The combination of lower exports and higher imports resulted in the widened deficit in January.

Currency implications

A larger trade deficit can exert downward pressure on the rupee because it increases demand for foreign currency to pay for imports.

However, the overall impact on the currency also depends on capital flows and foreign investment.

If foreign investments remain stable or increase, they can offset some of the pressure from the trade deficit.

Government response

Officials have indicated that they are monitoring trade trends closely.

Efforts are being made to promote exports through policy support and trade negotiations.

The reduction in US tariffs is expected to provide a boost to export sectors that were affected by higher duties.

The government is also encouraging diversification of export markets to reduce dependence on any single country.

Sector specific outlook

Sectors such as gems and jewellery, textiles, engineering goods and chemicals could benefit from lower US tariffs.

Exporters in these sectors have expressed optimism about improved competitiveness once the new tariff rates come into effect.

However, global demand conditions will continue to play an important role in determining export growth.

Monthly volatility

Trade data can show significant month to month volatility due to seasonal and price factors.

Analysts caution against drawing long term conclusions from a single month’s data.

They suggest looking at broader trends over several months to assess whether the deficit is widening structurally or temporarily.

Outlook for coming months

With US tariffs expected to be reduced, exporters are hopeful of a rebound in shipments.

If exports recover and gold imports moderate, the trade deficit could narrow in the coming months.

However, much will depend on global economic conditions, commodity prices and domestic demand patterns.

Conclusion

India’s merchandise trade deficit widened to 34.68 billion dollars in January 2026, driven by a surge in gold and silver imports and a decline in exports.

The month marked the last period impacted by high US tariffs on Indian goods, with relief expected soon.

As India prepares for trade talks in Washington, policymakers and businesses will be watching closely to see whether tariff reductions and improved market access help strengthen export performance and narrow the trade gap in the months ahead.

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