New Delhi, Sep 15 — India's merchandise trade deficit narrowed to $26.86 billion in August from $27.20 billion in the same month last year as the growth of exports outpaced imports for the first time, Commerce Secretary Rajesh Agrawal said on Monday.
Sequentially too, the trade deficit in August was lower than the corresponding figure of close to $32 billion in July this year.
Merchandise exports during August recorded a robust 26.12 per cent growth to $43.18 billion, while imports grew 14.1 per cent to $72.67 billion.
"Export growth was driven by engineering goods, petroleum products, chemicals and textiles, with the major demand coming from the US, EU, and BRICS economies," Agrawal said.
Gold imports plummeted to $2.3 billion in August this year, which was less than half of the corresponding figure of $5.4 billion in August 2025, the figures showed.
India’s current account deficit (CAD) stood at $4.2 billion in the April-June quarter (Q1) of the current financial year, holding steady at 0.5 per cent of GDP despite the rising prices of oil, LPG, and fertilisers in the global market due to the West Asia crisis, according to data released by the RBI earlier this month.
The CAD in the same quarter of the previous financial year was estimated at 0.4 per cent of GDP.
India has also become the fourth largest holder of foreign exchange reserves in the world after the record surge in dollar inflows triggered by the Reserve Bank of India’s (RBI’s) foreign currency non-resident (bank) — or FCNR(B) — deposits scheme, according to data compiled by Bloomberg.
With the $44.9 billion increase in its forex kitty to a record $785.7 billion during the week ended September 4, India has dislodged Russia from the fourth spot and is now ranked only behind China, Japan, and Switzerland, the data showed.
The record increase in the foreign exchange reserves has taken place despite a decline in the gold reserves component by $2.59 billion to $113.81 billion during the week as gold prices fell.
An increase in the foreign exchange reserves reflects strong fundamentals of the economy and gives the RBI more headroom to stabilise the rupee when it turns volatile.
A strong forex kitty enables the RBI to intervene in the spot and forward currency markets by releasing more dollars to prevent the rupee from going into a free fall.