India Trade Deficit Feb 2026: Imports Drop, Risks Ahead

INDIA FEBRUARY 2026 TRADE – FACT CHECK

The merchandise trade deficit for the month of February 2026 fell sharply from $34.68 billion in January to $27.10 billion in February 2026. This was triggered by a sharp fall in imports, especially gold. Also, the stand-off at the Straits of Hormuz has delayed shipments, so we could see some pressure shifting to the March trade data.

For FY26 (11 months), the top-5 export destinations in terms of change in value of exports were China, United States, United Arab Emirates (UAE), Spain, and Hong Kong. For the first 11 months of FY26, the top import source countries were China, United States, United Arab Emirates (UAE), Hong Kong, and Peru.

HOW MERCHANDISE TRADE EVOLVED IN LAST 1 YEAR

Here is the monthly data of merchandise exports, imports, and trade deficit.

Data Source: DGFT (# - All time high trade deficit)

How do Feb-26 trade figures compare with 12-month averages. Over last 12 months, the average merchandise exports stood at $37.18 Billion, and average merchandise imports stood at $64.67 Billion. For February 2026, exports and imports are marginally lower than averages. The average trade deficit in last 12 months stood at $(27.49) Billion; with the latest trade deficit tad lower at $(27.10) Billion. In February 2026, total trade at $100.32 Billion was lower than the 12-month average total trade. Overall data seems to be at par.

TRADE GAP – BOOSTING EXPORT AND TRIMMING IMPORTS

Here are star export performers in February 2026, on percentage increase in exports yoy. Cereals (+170.1%), Coffee (+31.9%), Meat & Dairy Products (+22.7%), Marine Products (+13.3%), Engineering Goods (+12.9%), and Mica, coal, ores (+10.5%) were the key export growth drivers in February 2026. Major import trimmers in the month of February 2026 were Project Goods (-81.3%), Cotton (-59.4%), Pulses (-38.5%), Newsprint (-34.1%), and Transport Equipment (-23.6%). The stand-off in West Asia has led to delays in imports being reported, although this could mean higher import pressures in March 2026.

TRADE DATA BREAK-UP FOR FEBRUARY 2026

Here is a break-up of the merchandise and services export and import data for February 2026, with comparable figures.

Data Source: DGFT and RBI

What is the big picture? For February 2026, the net figure has shifted from a trade surplus last year to a trade deficit this year. However, if you take the combined impact of goods and services, then the net deficit at $(3.95) billion is fairly reasonable. What where the major triggers for this shift. Trade deficit in goods has gone up by 87.9% yoy, but the services trade surplus is also up by 35.1% yoy. That has helped to largely wipe out the goods trade deficit. The overall deficit figure, as a result, is quite small. The real concern for India is the sharp surge in imports, with the advantage of cheap Russian oil gradually vanishing.

CUMULATIVE TRADE DATA FOR FY26 (APR-FEB)

Having seen the monthly picture of February 2026, here is a cumulative 11-month view.

Data Source: DGFT and RBI (11-months Trade data in Billion $)

If one looks at the overall data for the first 11 months of FY26, then services exports are now nearly 96.3% of goods exports. However, the imports of goods are sharply higher so the goods trade deficit is more than 50% higher than the services trade surplus for the current financial year. That also means that the overall trade deficit is up 20.4% compared to the similar period of last year. It remains to be seen how much pressure the global uncertainty will exert on the overall trade deficit.

As of the end of the third quarter, the current account deficit (CAD) reported by the RBI was at 1.0% of GDP. That is a number, well in control. Even assuming there is some spillage in the fourth quarter, the overall CAD is unlikely to cross 1.5% of GDP for the full year, in a worst-case scenario. The real challenge for India would be what happens in FY27, if the stand-off in West Asia continues? That is the million-dollar question!