Why in News?
India’s trade deficit shrank by 54% to $9.9 billion in August 2025, helped by a surge in merchandise and services exports and a drop in imports. Total exports rose 9.3% year-on-year to $69.2 billion, while imports fell 7% to $79 billion.
Description:
- Trade Deficit = Value of imports > exports of goods.
- It is part of the Balance of Trade (BoT), which itself is a component of the Current Account in BoP.
Types of Deficits:
- Merchandise Trade Deficit – excess of imports of goods.
- Service Trade Balance – may offset the goods deficit (India often runs a service surplus).
- Current Account Deficit (CAD) – includes trade deficit + net income & transfers.
Recent Context (2025):
- India’s monthly trade deficit widened due to:
- High gold imports before the festive season.
- Weak demand for pharma, electronics, gems & jewellery.
- Slowdown in China → fall in raw material exports.
- Petroleum exports drop despite softening oil prices.
Key Factors Influencing:
- Exchange rates & rupee depreciation.
- Global economic trends (e.g., oil shocks, Middle East conflicts).
- Domestic demand for luxury & energy goods.
- Trade barriers (e.g., EU’s carbon policy).
Implications:
- Currency depreciation → costlier imports.
- Pressure on Forex reserves.
- The domestic industry may lose competitiveness if imports flood the market.
- CAD ↑ → may worry investors & rating agencies.
La Excellence IAS Academy, the best IAS coaching in Hyderabad, known for delivering quality content and conceptual clarity for UPSC 2025 preparation.
FOLLOW US ON:
◉ YouTube : https://www.youtube.com/@CivilsPrepTeam
◉ Facebook: https://www.facebook.com/LaExcellenceIAS
◉ Instagram: https://www.instagram.com/laexcellenceiasacademy/
GET IN TOUCH:
Contact us at info@laex.in, https://laex.in/contact-us/
or Call us @ +91 9052 29 2929, +91 9052 99 2929, +91 9154 24 2140
OUR BRANCHES:
Head Office: H No: 1-10-225A, Beside AEVA Fertility Center, Ashok Nagar Extension, VV Giri Nagar, Ashok Nagar, Hyderabad, 500020
Madhapur: Flat no: 301, survey no 58-60, Guttala begumpet Madhapur metro pillar: 1524, Rangareddy Hyderabad, Telangana 500081
Bangalore: Plot No: 99, 2nd floor, 80 Feet Road, Beside Poorvika Mobiles, Chandra Layout, Attiguppe, Near Vijaya Nagara, Bengaluru, 560040
