India’s export engine sputtered in October, hit by U.S. punitive tariffs, a slowing global economy, and a sudden spike in gold inflows that helped push the country’s trade deficit to a record high. Commerce ministry data showed India’s overall exports slipped to US$72.89 billion (₹6.12 lakh crore) in October, marginally lower than last year, while imports jumped to US$94.70 billion (₹7.95 lakh crore). The result: a sharply wider monthly trade deficit of US$21.80 billion (₹1.83 lakh crore).

Merchandise trade alone paints a bleaker picture. Goods exports fell 11.8% to US$34.4 billion (₹2.89 lakh crore), the lowest in 11 months, even as merchandise imports soared to US$76.1 billion (₹6.39 lakh crore). That pushed the goods deficit to an unprecedented US$41.7 billion (₹3.51 lakh crore), driven largely by an unexpected surge in gold imports, which tripled to US$14.7 billion (₹1.23 lakh crore) as speculative buying intensified ahead of the festive season.

Aditi Nayar, chief economist at ICRA, said the numbers were “far worse than anticipated,” noting that both oil and non-oil exports contracted at double-digit rates. Exports to the U.S. fell 8.6%, reflecting the impact of new tariffs and penalties, but shipments to other regions dropped 12.5%, pulled down by a high base and holiday disruptions. “The merchandise trade deficit sharply exceeded our forecast,” she said, warning that India’s current account deficit could widen to 2.4–2.5% of GDP in the December quarter from the ~1.8% expected in the previous quarter.

The U.S. tariff shock is leaving a heavy imprint across Indian industry. Ajay Srivastava of the Global Trade Research Initiative (GTRI) said India’s shipments to the U.S. have fallen 28.4% between May and October, wiping out more than US$2.5 billion (₹21,000 crore) in monthly export value. He warned that October’s modest rebound in some categories masks a deeper erosion of India’s presence in its most critical export market. “The 50% tariff on engineering, auto components, textiles, chemicals and select machinery is distorting supply chains,” he said.

Engineering goods — India’s largest merchandise export category — are among the hardest hit. Shipments slid 16.7% year-on-year to US$9.37 billion (₹79,700 crore), down from US$11.25 billion (₹94,500 crore) a year earlier. EEPC India chairman Pankaj Chadha called the fall “expected but alarming,” adding that the tariff, which came into force in late August, was now showing its full impact. He credited the government’s ₹25,060 crore Export Promotion Mission and up to ₹20,000 crore in additional credit support with helping the sector absorb the shock. 

“Without timely support, the impact would have been significantly harsher,” he said. He added that trade deals with the UAE, UK and Australia could help engineering exporters rebuild momentum toward the US$250 billion (₹21 lakh crore) export target for 2030.

But engineering isn’t alone. Sectoral weakness is now broad-based, said FIEO president S.C. Ralhan, who described October’s numbers as “mixed but worrying.” Overall exports at US$72.89 billion (₹6.12 lakh crore) were slightly lower than last year, but imports at US$94.70 billion (₹7.95 lakh crore) marked a sharp increase. Merchandise exports, he noted, fell from US$38.98 billion (₹3.27 lakh crore) in October 2024 to US$34.38 billion (₹2.88 lakh crore) this year. Meanwhile, merchandise imports rose from US$65.21 billion (₹5.48 lakh crore) last year to US$76.06 billion (₹6.39 lakh crore) this October, widening the goods deficit to US$41.68 billion (₹3.50 lakh crore).

Ralhan said the contraction reflects a broader global slowdown amplified by geopolitical friction and volatile commodity prices. Logistics costs and input price swings continue to erode competitiveness, he added, while the rise in imports — especially industrial inputs — underscores India’s dependence on foreign raw materials. He welcomed the government’s continuing support and recent RBI relief measures but urged the central bank to extend tariff-related liquidity assistance to all affected exporters, not just select sectors.

Behind the headlines lies a deeper structural tension: India’s trade is increasingly import-heavy, even as global demand weakens. Non-oil non-gold imports rose 12.4%, led by machinery, electronics, fertilizers, non-ferrous metals and silver — a sign of domestic investment momentum, but also a reminder of the country’s reliance on foreign supply chains. Crude oil import costs eased slightly, but that relief was overshadowed by soaring gold imports and robust demand for industrial intermediates.

For policymakers, October’s numbers are a warning shot. Officials believe export incentives under the Export Promotion Mission, improved credit access and ongoing bilateral trade talks could stabilize the picture by early 2026. But analysts caution that unless India builds scale, deepens domestic manufacturing capacity and strengthens its value-chain integration, the country will remain vulnerable to sudden external shocks. For now, October’s data serves as a stark reminder of how quickly global turbulence — from Washington’s tariff walls to gold-market speculation — can widen India’s economic fault lines.

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