Trump's Tariffs Wreak Havoc, India's Exports Clock Sharpest Fall In 20 Months In Feb

Government data released on Monday highlighted that imports shrank by 16.3 per cent year-on-year to $50.96 billion, marking the largest dip in nearly two years and the first drop in 11 months.

India’s merchandise exports recorded a steep 10.9 per cent drop in February, marking their sharpest decline in 20 months. The downturn in outbound shipments, which fell to $36.91 billion in February 2025 from $41.4 billion clocked in the same period a year earlier, was accompanied by a significant contraction in imports, bringing the trade deficit to a three-and-a-half-year low of $14.05 billion.

Government data released on Monday highlighted that imports shrank by 16.3 per cent year-on-year to $50.96 billion, marking the largest dip in nearly two years and the first drop in 11 months.

What Drove The Decline In Shipments?

The decline was primarily driven by a 29.6 per cent fall in crude oil imports, which totaled $11.9 billion, while gold imports also plunged by 62 per cent to $2.3 billion. The contraction in both exports and imports was attributed to lower global petroleum prices, growing economic uncertainty, and increasing trade restrictions imposed by the United States.

Challenges Ahead

The outlook for India’s exports remained clouded due to geopolitical and trade policy uncertainties, particularly as President Donald Trump's administration prepares to impose reciprocal tariffs from April 2. The US has already implemented a 25 per cent tariff on steel and aluminium imports, prompting Indian exporters to report hesitancy among American importers in placing new orders.

Where Does India Stand Among Emerging Economies?

India’s export performance also lagged behind other emerging economies. In contrast, China saw a 7.1 per cent rise in exports for January-February 2025, while Vietnam’s outbound shipments climbed 8.4 per cent during the same period. Cumulatively, India’s merchandise exports remained stagnant at $395 billion for the first 11 months of the fiscal year.

Despite these headwinds, Commerce Secretary Sunil Barthwal expressed confidence that total exports, including goods and services, would reach $800 billion by the end of FY25, compared to $778 billion in the previous fiscal year.

A sectoral breakdown showed that non-petroleum and non-gems-and-jewellery exports—considered a more accurate indicator of trade trends—declined by nearly 5 per cent to $28.57 billion.

Several key sectors saw contractions, including gems and jewellery (-20.7 per cent), drugs and pharmaceuticals (-1.5 per cent), organic and inorganic chemicals (-24.5 per cent), petroleum products (-29.2 per cent), and engineering goods (-8.6 per cent). However, certain segments showed resilience, with rice exports growing by 13.2 per cent, electronic goods by 26 per cent, and readymade garments by 4 per cent.

Meanwhile, services exports continued to show strength, rising by 23.6 per cent to $35.03 billion in February. Services imports also increased, growing by 8.6 per cent to $16.55 billion, leading to a trade surplus of $18.5 billion. However, these figures remained estimates and would be revised upon the Reserve Bank of India’s final report.