India’s trade deficit expanded to a three-month high of $34.68 billion in January 2026, influenced by the final month of a 50% U.S. tariff on Indian exports. This tariff is expected to be reduced to 18% this week, according to government officials.
The unexpected increase in the trade deficit was attributed to a significant rise in gold and silver imports, which elevated total imports by 12% month-on-month to $71.24 billion. Meanwhile, exports declined by 5% to $36.56 billion, as reported by the commerce ministry on February 16, 2026.
U.S. President Donald Trump announced earlier this month a reduction in tariffs on Indian goods from 50% to 18%, providing relief to exporters and policymakers. Trump noted that India has agreed to cut Russian oil purchases and plans to more than double its annual imports of U.S. goods.
A trade delegation led by India’s trade secretary, Rajesh Agrawal, will visit Washington next week to finalize a trade agreement. The two countries are negotiating based on an interim framework concluded earlier this month.
Merchandise exports to the U.S., India’s largest export market, decreased by 4.5% month-on-month to $6.58 billion in January. However, shipments to the U.S. rose to $72.46 billion in the first ten months of the fiscal year.
Economists had forecasted an overall trade deficit of $26 billion for January, but the actual figure surpassed expectations. The surge in imports was driven by gold and silver shipments, with gold imports increasing to $12.07 billion from $4.13 billion in December.
Inflows into Indian gold exchange-traded funds nearly doubled in January, reaching 240.4 billion rupees ($2.65 billion). Kotak Institutional Equities warned that continued large inflows into gold ETFs and ongoing gold imports could challenge India’s current account deficit.
Government data indicated that services exports in January were estimated at $43.90 billion, with imports at $19.60 billion, resulting in a services trade surplus of $24.30 billion. The central bank is expected to release detailed monthly services trade data in two weeks.
Published in SouthAsianDesk, February 17th, 2026
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