
India’s Trade Deficit Narrows in August, But Oil Could Quickly Change the Story India’s latest trade figures offer a mixed but important message: the country’s merchandise trade deficit narrowed sharply in August, but the improvement may be vulnerable to a renewed rise in crude oil prices. India’s merchandise trade deficit fell to $26.86 billion in August 2026, from about $31.98 billion in July. The improvement came as imports dropped substantially, particularly gold imports, while exports remained strong. At first glance, that sounds like straightforward good news. It isn’t quite that simple. The August numbers show that India’s external trade position can improve when imports moderate and exports remain resilient. But they also expose a familiar vulnerability: India remains highly sensitive to international energy prices. And this time, the warning light is coming from the Middle East. A smaller trade gap—but why? India exported goods worth $43.81 billion in August, slightly below July’s $44.24 billion but still the highest August export figure in a decade, according to Reuters’ report based on the latest trade data. Imports, meanwhile, fell to $70.67 billion, from $76.22 billion in July. That difference produces the merchandise trade deficit: $70.67 billion − $43.81 billion = $26.86 billion.
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