India’s trade deficit shrinks in March as US export surge offsets Mideast hit

NEW DELHI: India’s merchandise trade deficit unexpectedly narrowed in March as a surge in exports to the US helped cushion the impact of the ongoing Iran war that has disrupted shipping routes and inflated energy costs.

The deficit fell to a nine-month low of USD20.67 billion, with exports rising to USD38.92 billion in March from USD36.61 billion in the previous month and imports falling to USD59.59 billion from USD63.71 billion, data from the trade ministry showed on Wednesday.

Exports to the US rose 17.4 percent month-on-month to USD8.02 billion, supported by a cut in tariffs to 10 percent following a US Supreme Court ruling. This has helped boost shipments of textiles and engineering goods to India’s largest export market that had imposed tariffs of up to 50 percent on a wide swath of goods.

The trade data underscore the opposing forces shaping India’s export outlook: supply disruptions and surging logistics costs stemming from the Iran conflict and a partial revival in US demand.

While lower tariffs have bolstered shipments, exporters warn about rising freight and insurance costs, alongside severe delays near the Strait of Hormuz - a critical supply route that has been nearly blocked for a month and a half.

Negotiations between the US and Iran over the weekend failed but talks could resume this week.

“Exports to the Middle East in March dropped by USD3.5 billion… this has impacted goods exports in the month,” Rajesh Agrawal, India’s trade secretary, told reporters in New Delhi, referring to the impact of Iran war on exports.

India, the world’s No. 3 oil consumer, imports more than 80 percent of its crude oil needs and 60 percent of its cooking gas, with the Middle East accounting for a large chunk of the supply.