India’s Trade Shortfall Could Reach USD 300 Billion Next Year

India’s trade gap is likely to widen to USD 300 billion in the financial year 2025-26, says a new report by ICICI Bank. This is expected even though oil prices are set to stay stable. The main reason for the rising trade deficit is weak non-oil exports, while imports are projected to stay strong thanks to healthy domestic growth.

A trade deficit happens when a country buys more from abroad than it sells. A current account deficit is a wider measure that also includes things like investment income and money sent home by Indians working overseas.

The report said that global economic conditions are still shaky because of geopolitical tensions and possible trade disputes. But it also highlighted that India’s economy remains strong, helped by government spending and supportive monetary policies. Rural demand is doing well, and sectors such as services, exports, and travel inside the country continue to see growth.

ICICI Bank expects services exports and remittances to stay steady in FY26, though growth might slow because of softer demand from the US. Given these trends, the bank forecasts India’s current account deficit to be around USD 30 billion in FY26, or 0.7% of GDP.

In FY25, India’s trade deficit rose to USD 287 billion from USD 245 billion in FY24, mainly due to a 6.2% jump in imports. While exports so far this year have grown modestly by 3.1% year-on-year, this was mostly because of a sharp 22% rise in exports to the US. Exports to other countries actually fell by 1.2%.

Despite these challenges, the report remains upbeat about India’s external position, pointing to the country’s resilience in the face of global uncertainties.