India trade deficit narrowed to $9.41 billion in August 2026, but the headline number masks a much larger merchandise gap. Government data released on September 15 shows that goods imports exceeded goods exports by $26.86 billion, while a $17.45 billion services surplus absorbed much of that shortfall.
Total exports of merchandise and services were estimated at $82.68 billion in August, up 25.41% from $65.93 billion a year earlier. Total imports rose 18.75% to $92.09 billion from $77.55 billion. The resulting overall deficit was smaller than the $11.62 billion recorded in August 2025.
Goods exports rose sharply year on year
Merchandise exports increased 26.12% to $43.81 billion from $34.74 billion a year earlier. Merchandise imports climbed 14.05% to $70.67 billion from $61.96 billion.
The government data also show where that growth was concentrated across the export basket. Non-petroleum, non-gems and jewellery exports reached $34.68 billion, compared with $28.26 billion a year earlier.
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But the month-on-month picture is less straightforward. Merchandise exports were $44.24 billion in July, meaning August exports actually fell by about $430 million. Imports dropped much more sharply, from $76.22 billion in July to $70.67 billion in August.
That means the August improvement in the merchandise balance was driven primarily by the fall in imports rather than a rise in goods exports from the previous month.
Gold imports fell sharply
Gold was one of the clearest changes in the import basket. Imports fell to about $2.3 billion in August from $4.16 billion in July. Compared with August 2025, the decline was 57.7%, according to the trade data cited in the government’s August release and subsequent official commentary.
The fall helped reduce the merchandise deficit, although it did not eliminate pressure from other imports. Crude oil imports rose 25.8% year on year to $16.69 billion in August, while the average Indian crude basket rose to $90.19 a barrel from $82.04 in July.
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Services are carrying a large part of the balance
The services account substantially changed the overall picture. Services exports were estimated at $38.87 billion in August, up 24.61% from $31.19 billion a year earlier. Services imports rose to $21.42 billion from $15.59 billion.
The resulting $17.45 billion services surplus offset most of the $26.86 billion merchandise deficit. Without that services surplus, the overall trade balance would have been considerably wider.
Commerce Secretary Rajesh Agrawal said export growth momentum accelerated in August and pointed to engineering, electronics and other sectors as contributors. He also said the rise was not merely value-led, with 68 of 168 principal commodities recording both volume and value growth.
That volume claim remains an official assertion pending independent examination of the underlying commodity-level data.
US and China shipments both rose
The August data also showed strong growth in two major markets. Merchandise exports to the United States rose 21.83% year on year to $8.4 billion, while exports to China increased 52.35% to $1.9 billion.
Imports rose from both markets. Chinese imports increased 17% to $12.77 billion, while imports from the United States jumped 65.78% to $5.97 billion.
For April-August, the United States remained India’s largest export destination, with shipments of about $42.8 billion. Exports to China reached $9.64 billion, up 38.71% over the period.
The wider five-month figures show that merchandise exports rose 17.85% to $215.91 billion, while merchandise imports increased 18.21% to $363 billion. That left the merchandise trade deficit for April-August at $147.09 billion, compared with $123.88 billion a year earlier.
Trade agreements are advancing on separate tracks
India’s trade-market diversification effort is also moving through new agreements. The India-UK Comprehensive Economic and Trade Agreement entered into force on July 15, 2026.
The India-EU agreement is at an earlier legal stage. Negotiations concluded on January 27, but the European Commission said on September 11 that proposals had been submitted for signature and conclusion. It was not yet legally in force as of September 15.
The August numbers therefore present two different signals: exports are growing strongly compared with a year earlier, while the merchandise deficit remains large. The next trade releases will show whether the August import decline persists or whether the $26.86 billion goods gap widens again.
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