India's merchandise trade deficit reached $41.68 billion in October 2025, an all-time high that exceeded the previous record and surpassed economist projections of $29.4 billion. Gold imports rose 199% year-on-year to $14.72 billion, while exports declined 11.8% to $34.38 billion, marking the largest decline in 14 months.
According to data released by the Ministry of Commerce and Industry on November 16-17, total imports reached a record $76.06 billion, up 16.6% from October 2024. Commerce Secretary Rajesh Agrawal attributed the gold surge to deferred demand from the first half of FY26, when volumes fell 25% (from 401.27 tonnes to 299.77 tonnes) due to elevated prices. Diwali and Dhanteras triggered a consumption catch-up, with Switzerland supplying 40% of imports, followed by UAE at 16% and South Africa at 10%. Silver imports jumped sixfold to $2.72 billion, amplifying the precious metals effect.
The export side shows corresponding weakness. Shipments to the US fell to $6.31 billion from $6.9 billion a year earlier, reflecting the cumulative impact of 50% tariffs that became effective August 27, 2025. October marked the sixth consecutive month of declining US exports. The weakness extended beyond America, engineering goods fell 16.7%, chemicals dropped 21%, and pharmaceuticals declined 5.2%. Non-petroleum, non-gems exports fell 10.15%, indicating broad-based competitiveness challenges.
The structural implications merit examination.
India's gold import behavior demonstrates a predictable pattern that creates cyclical current account pressure. When prices rise, Indian consumers don't abandon gold, they delay purchases. The 25% volume decline in the first half compressed into October's surge of approximately 160-170 tonnes, demonstrating how price-sensitive demand shifts within months rather than disappearing. Gold prices had risen 58% year-to-date by October, with an 11.6% single-month gain in September breaking the $4,000 per ounce level. This makes Q3 consistently vulnerable during festival seasons, creating a recurring challenge for policymakers managing the current account deficit.
The currency implications are measurable. ICRA projects the current account deficit will widen to 2.4-2.5% of GDP in Q3 FY26 from 1.8% in Q2. The rupee has weakened to 88.67 against the dollar, and further depreciation creates a complex trading environment. A weaker rupee raises import costs, potentially influencing inflation as the RBI maintains its neutral policy stance. Import-dependent sectors face margin pressure from rising input costs, while exporters gain pricing competitiveness, though only if global demand recovers.
The broad-based export decline indicates challenges beyond US tariff effects. The sectoral weakness across engineering, chemicals, and pharmaceuticals suggests India faces demand challenges across multiple markets. This reflects softer global demand and potential competitiveness issues that extend beyond festival-driven import spikes.
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