Merchandise trade deficit: Figure may narrow to $26.1 billion in August on festive gold demand; US tariff risks remain – The Times of India

India’s merchandise trade deficit is likely to ease marginally in August 2025, supported by a rise in gold imports ahead of the festive and wedding season, according to a report by Union Bank of India.The report estimated the deficit at $26.1 billion in August, compared with $27.4 billion in July, noting, “Merchandise trade deficit likely narrowed marginally in Aug’25 to $26.1 billion vis-a-vis $27.4 billion a month ago.”As per news agency ANI, the modest narrowing was driven largely by a surge in gold demand, with imports nearly doubling despite higher prices. This provided momentum to trade activity, though softening commodity prices offered only mild relief.At the same time, trade dynamics continued to face pressure from the stalemate in the India-US trade deal. The US, which accounts for about 20 per cent of India’s goods exports, remains a key market, but the lack of progress in negotiations has weighed on outbound shipments. To cushion domestic exporters, the government recently relaxed norms under the Advance Authorization Scheme, allowing duty-free import of raw materials for export production. This measure is aimed at mitigating the effect of the ongoing 50 per cent US tariff, ANI reported.Looking ahead, Union Bank projected that the trade deficit would likely remain elevated due to strong gold imports during the festive season, steady energy demand, and reliance on electronics and capital goods imports. Some relief may emerge from softer global commodity prices and import substitution initiatives.However, the bank highlighted that export growth is expected to stay muted amid global demand weakness and tariff headwinds. Any breakthrough in the India-US trade deal could help reduce tariff barriers, supporting export recovery over time.As per another Union Bank of India report, India’s current account deficit is projected to nearly double in FY26 to 1.2% of GDP, compared with 0.6% in FY25, as widening trade gaps and tariff tensions add pressure.