India’s trade deficit likely narrowed to USD 21.5 Bln in February from USD 23 Bln in January: UBI Report

NEW DELHI: India’s trade deficit likely narrowed to USD 21.5 billion in February, down from USD 23 billion in January, according to a report by Union Bank of India.

However, the report also noted that the geopolitical risks, especially concerns over tariffs, will continue to influence trade dynamics. It said “Merchandise trade deficit likely narrowed in Feb’25 to USD 21.5 bln vis-a-vis USD 23.0 bln a month ago”.

The report suggested that the reduction in the merchandise trade deficit was mainly driven by a moderation in the Non-Oil-Non-Gold (NONG) segment, supported by seasonal factors during the quarter.

Despite this improvement, the report added that the extent of recovery in trade balance may be limited due to growing concerns over new trade restrictions and tariff increases following the change in the U.S. administration.

The oil trade deficit is also expected to have narrowed in February, supported by a fall in global Brent crude oil prices. Brent crude dropped to USD 74.95 per barrel in February from USD 78.35 per barrel in January.

A notable trend was the decline in oil imports from Russia, which fell 14.5 per cent month-on-month to 1.43 million bpd, the lowest level since January 2023. As a result, Russia’s share in India’s total oil imports dropped to around 30 per cent in February, a sharp decline from the 2024 average of approximately 38 per cent.

Although crude oil prices eased in February, the report noted that the impact on imports might be delayed since contracts are signed in advance. This could explain why India’s oil import bill declined in January compared to December, even though prices and volumes had increased sequentially.

Gold imports are estimated to have risen to 70 tonnes in February, up from 40 tonnes in January. This increase was likely driven by seasonal demand during the marriage season.

Additionally, investment demand for physical gold remained strong due to pressure on riskier assets like equities. The report highlights that with ongoing global economic uncertainties under Trump’s second term, the demand for gold as a safe-haven asset is expected to persist.

Looking ahead, the report noted that the geopolitical risks, particularly concerns over trade tariffs, will continue to shape India’s trade performance in the coming months. (ANI)