New Delhi [India]: India’s current account deficit (CAD) is expected to face a sharp downside risk for FY25 GDP following a surprising trade surplus in February 2025, according to a report by the Union Bank of India (UBI).
India recorded a rare trade surplus of USD 14.05 billion in February, marking a significant shift from previous trends.
“With the sharply positive surprise in trade data, we see a downside risk to our earlier FY25 C/A deficit projection of 1.2 per cent,” the UBI report stated.
Despite this improvement, the report maintained its FY26 CAD forecast at 1.2% of GDP, citing uncertainties in export dynamics and potential commodity price fluctuations.
“We maintain our FY26 C/A deficit forecast at 1.2 per cent of GDP, as the outlook for exports remains uncertain due to the looming threat of reciprocal tariffs the US plans to impose on trading partners starting 2nd April,” the report added.
Key Trade Data Highlights:
- Merchandise exports contracted by 10.9% YoY to USD 36.91 billion, marking the sharpest decline in 20 months.
- Imports fell even more sharply by 16.3% YoY to USD 50.96 billion, contributing to the improved trade balance.
- A decline in global oil prices and reduced demand for gold and non-oil, non-gold (NONG) imports played a major role in narrowing the deficit.
- Oil imports dropped, aided by falling Brent crude prices.
- Gold imports moderated significantly, shrinking from 30.8 tons in January to 25.1 tons in February, far below the 100 tons imported in November 2024 during the festival and wedding season.
On the services front, India maintained robust performance, recording a services trade surplus of USD 18.48 billion in February, slightly up from USD 18.02 billion in January.
As a result, India’s total trade balance, combining goods and services, shifted to a USD 4.43 billion surplus — a remarkable turnaround from the USD 18.05 billion deficit reported the previous month.
Despite geopolitical tensions and tariff concerns, India’s trade sector has displayed resilience, reflecting the strength of its trade policies and sustained global demand for Indian goods and services.