India’s Trade Deficit Widens in Feb 2026; External Risks Loom

India’s latest EXIM data shows a mixed but slightly concerning trend, with the trade balance turning negative amid a sharper rise in imports.

Trade Deficit Returns After Previous Surplus

In February 2026:

• Total Exports (Goods + Services): $76.13 billion
• Total Imports: $80.09 billion

This resulted in a trade deficit of $3.96 billion, compared to a surplus in the same period last year, indicating a reversal in external balance dynamics.

Merchandise Trade Drives the Weakness

The primary drag came from merchandise trade:

• Exports: $36.61 billion (largely flat)
• Imports: $63.71 billion (sharp increase)

The surge in imports was driven by:

• Higher commodity prices
• Strong domestic demand
• Increased reliance on energy and raw material imports

This widening gap between exports and imports has put pressure on the overall trade balance.

Services Sector Provides Stability

A key positive remains India’s strong services sector:

• Services exports: $39.53 billion

This segment continues to:

• Act as a cushion against merchandise deficit
• Reflect India’s structural strength in IT, financial, and business services

Crude Oil Risk: A Key Concern Ahead

One of the biggest risks to India’s trade outlook is rising Crude Oil prices.

Due to escalating geopolitical tensions in the Middle East:

• Oil prices have surged
• Import costs are likely to increase further

Potential impact:

• Higher import bill
• Increased inflationary pressure
• Weakening of the Indian Rupee

Additional External Pressures

Apart from crude oil, several other factors could worsen the trade outlook:

• Supply chain disruptions
• Higher freight and insurance costs
• Potential logistics delays in Gulf trade routes

Sectors at risk include:

• Engineering goods
• Chemicals
• Gems & jewellery
• Agricultural exports

Outlook: Deficit May Stay Elevated

Looking ahead, India’s trade balance may remain under pressure due to:

• Elevated commodity prices
• Global geopolitical uncertainties
• Strong domestic demand driving imports

Unless exports pick up meaningfully or commodity prices cool, the trade deficit could widen further in the coming months.

Key Takeaway

India’s external sector is entering a more challenging phase, where:

• Imports are rising faster than exports
• Services remain the only strong buffer
• Global risks (especially crude oil) could amplify pressures

Monitoring commodity trends and global developments will be crucial for assessing the trajectory of India’s trade balance.