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“Why India’s FY25 Trade Numbers Suggest the Current Account Deficit Will Stay Below 1.3% of GDP”
“In FY25 (April–March) India’s merchandise exports were nearly flat while imports rose ~6%, widening the goods trade deficit to about US$283 billion. On the flip side, the services surplus grew ~16% y-o-y, helping to offset around two-thirds of the goods gap. Combined, the overall trade deficit reached ~US$94 billion. Given the strong services and remittance flows in Q4, the full-year current account deficit is likely to remain within 1.2-1.3% of GDP—a manageable level. This blog unpacks what the trade figures tell us and why the CAD outlook looks stable.”
Written by: SERNET Research Team
Table of Content
What The FY25 Trade Data Tells Us?
The DGFT recently released the updated merchandise and services trade data for the month of March 2025 and for the full fiscal year FY25. The controlled merchandise trade deficit in the last quarter has helped the overall deficit to stay under $100 billion for FY25. The services surplus for FY25 managed to offset nearly 67% of the merchandise trade deficit. The gist of the annual trade figures are captured in the table below.
| Macro Variables (Year-to-Date) |
FY25 (Apr-Mar) |
FY25 (Apr-Feb) |
FY24 (Apr-Mar) |
Change YOY (%) |
| Merchandise Exports | 437.42 | 395.63 | 437.07 | 0.08% |
| Merchandise Imports | 720.24 | 656.68 | 678.21 | 6.20% |
| Merchandise Trade Deficit | -282.82 | -261.05 | -241.14 | 17.28% |
| Services Exports | 383.51 | 354.90 | 341.06 | 12.45% |
| Services Imports | 194.95 | 183.21 | 178.31 | 9.33% |
| Services Trade Surplus | 188.56 | 171.69 | 162.75 | 15.86% |
| Combined Exports | 820.93 | 750.53 | 778.13 | 5.50% |
| Combined Imports | 915.19 | 839.89 | 856.52 | 6.85% |
| Overall Trade Deficit | -94.26 | -89.36 | -78.39 | 20.24% |
| Data source: DGFT / RBI | ||||
3 Things We Read From The FY25 Trade Data
- The merchandise trade deficit was higher 17.3% yoy while the services surplus grew by 15.9% yoy. Due to this discrepancy, the overall deficit for FY25 at $94.26 billion was 20.2% higher than the previous fiscal year.
- For the full year FY25, the total merchandise trade (imports + exports) crossed the $1.1 trillion mark, while overall goods plus services trade crossed the $1.7 trillion mark. This is appreciable despite the challenges faced in global supply chains.
- The merchandise trade deficit for FY25 was 17.3% higher than FY24 largely due to a spike in gold imports and a spike in crude import prices as the benefits of Russian crude discounts narrowed. Services surplus was hit by the IT sector slowdown.
What Does This Mean For Full Year CAD?
The FY25 full year current account deficit (CAD) will only be published towards the end of June 2025. The CAD comprises of total deficit as above, payouts on account of interest and dividend on investments and receipts on account of foreign remittances. However, it is the above total deficit that is the real swing factor for determining the CAD for the full year. By that definition, the last quarter must have been relatively sober for CAD.
As of the end of the third quarter, the current account deficit (CAD) for 9 months stood at 1.3% of GDP. That is nothing to be concerned about. Also, considering that the fourth quarter has been relatively sober, the overall CAD is unlikely to cross the range of 1.2% to 1.3% of GDP. There are reports of remittances surging in the fourth quarter amidst the weak rupee. That would surely be icing on the cake, but CAD may not be a worry!
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