India’s trade gap shrinks in March, swells in FY26
According to official data released on Wednesday, exports decreased by 7.44% to $38.92 billion in March, the sharpest decline in the last five months; Imports decreased by 6.5% compared to the previous year, falling to $59.59 billion. The trade deficit decreased to 20.67 billion dollars from 21.7 billion dollars the previous year. March was the first month of the war, which started on February 28.
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For the full year, India’s trade deficit widened to $333.2 billion from $283.5 billion in FY25.
Commerce Minister Rajesh Agrawal said exports and imports to West Asia fell by half in March and logistical challenges will continue in April. “Despite a difficult year, the performance is good. March exports are at the highest level for this year,” he said. “There were headwinds in March which brought the numbers down to some extent. We are hopeful that the next financial year will be better and the difficulties will not continue for long.”
Decline in Gulf Trade
March was the first month of the war in West Asia, which began on February 28.
For the full year, India’s trade deficit widened to $333.2 billion from $283.5 billion in FY25. Commerce minister Rajesh Agrawal said exports and imports to West Asia fell by half in March and logistical challenges will continue in April. “Despite a difficult year, the performance is good. March exports are at the highest level among all months this year,” he said. “There were headwinds in March which brought the numbers down to some extent. We hope the next financial year will be better and the difficulties will not continue for long.”
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Commerce and Industry Minister Piyush Goyal shared on In March, India’s goods exports to the Gulf decreased by 57.9% to 2.5 billion dollars, while its imports from the region decreased by 51.64% to 8.7 billion dollars. Many ports in the region are inaccessible and the effects of the conflict will continue. “April will also be a difficult month due to logistical challenges,” Agrawal said. But he said the export sector was adapting quickly and global supply chains were recalibrating.
Imports decreased by 6.51% to 59.59 billion dollars in March, from 63.75 billion dollars in March 2025.
Overall, India’s cumulative exports of goods and services in FY26 increased by 4.22% to $860.09 billion from $825.26 billion in FY25. Merchandise exports increased by 0.93% to $441.78 billion in FY26; this figure was $437.7 billion in FY25.
The rise in gold and silver prices resulted in their imports rising by 35% to $84 billion in FY26.
Agrawal said goods exports rose marginally even in a year that saw many challenges, including reciprocal tariffs imposed by the US, apart from the West Asian war. He expressed hope that FY27 will be better for India with smoother trade and operationalization of various free trade agreements (FTAs) and will help raise expectations. The commerce secretary added that the Center aims to connect with all stakeholders and ensures special monitoring of perishable cargo. “These are not normal times in trade with the Middle East,” he said. Federation of Indian Export Organizations President SC Ralhan said, “Our export sector is adapting quickly and we can send everything we cannot send to the Middle East to other markets. India’s average monthly exports to West Asia, which was $6 billion per month, dropped to $2.5 billion in March. Crossing $860 billion in exports is a remarkable achievement, especially in an environment of global uncertainties, supply chain disruptions and fluctuating demand,” and continued: “It highlights the adaptability and strength of Indian exporters.”
Engineering products, petroleum products, electronics, pharmaceuticals, chemicals, textiles, gems and jewellery, rice and seafood were the driving forces of exports.
The USA, UAE, China, the Netherlands and the UK continued to be important export points. India has resumed rice exports to China after stopping them for the last two years.
While trade in goods and services increased by 5.4% in FY26, reaching a record $1.84 trillion, the country’s overall trade deficit expanded by 26% to $119.3 billion, as imports outpaced exports. India’s imports of crude and petroleum products fell 35.8% in March as disruptions in the Strait of Hormuz blocked oil shipments.
Exporters said FY26 was marked by geopolitical tensions, changes in the Donald Trump administration’s trade policy and logistical challenges.
“Engineering goods exports reached an all-time high of $122.43 billion in FY26 despite many external challenges,” said Pankaj Chadha, President, EEPC India. “In March 2026, when one of the key sea lanes was disrupted due to the West Asian conflict, exports of engineering goods recorded a marginal growth of 1.1%.”
He said that there is an inflationary trend in raw material prices.
Services, SEZs
Agrawal said this could be the year when services can outpace goods exports.
“Services are taking the breath away from goods exports,” an official said. He said services exceeded exports of goods in the December quarter of FY26.
India has notified a special economic zone (SEZ) proposed by Tata Semiconductor Manufacturing at Dholera in Gujarat, which will pave the way for the first of the country’s five semiconductor manufacturing facilities.
Tata Semiconductor Manufacturing has proposed an investment of Rs 91,000 billion for its chip manufacturing unit, which is the linchpin in India’s drive to build an indigenous silicon ecosystem. The proposal was approved by the approval board chaired by the minister of commerce.
FTA
While India’s trade agreement with the UK is expected to come into force in May 2026, the India-Oman FTA is expected to come into force on June 1, 2026, subject to the consent of both parties. Efforts are on to sign the India-EU FTA in calendar year 2026 and the government hopes to bring it into force in FY27. The India-New Zealand FTA is expected to be signed in New Delhi on April 27 and will be implemented within a few months.
