INTEGRATED MAINS AND PRELIMS MENTORSHIP (IMPM) 2025 Daily KEY
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Trade Deficit Dilemma and Right to Work, G20 , Launch Vehicle Mark-3 (LVM3), Food price index are important for both preliminary and main exams? Discover more insights in the UPSC Exam Notes for November 24, 2025
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For Preliminary Examination: Current events of national and international Significance
For Mains Examination: GS III - Economy
Context:
India’s trade deficit in October surged by 141% in October 2025 to $21.8 billion. While this is a seemingly alarming jump, underlying data show that things aren’t all that bad, with India’s exports displaying some resilience in the face of significant headwinds, and its imports being disproportionately affected by the import of a few items.
Read about:
Balance of Payments (BoP)
Trade Deficit Dilemma
Key takeaways:
What happened to India’s trade balance?
- The trade balance reflects the gap between a country’s imports and exports. When imports outweigh exports, it results in a trade deficit; the opposite leads to a trade surplus.
- In October 2025, India’s trade deficit widened sharply to $21.8 billion, compared to $9.05 billion in the same month of the previous year.
- This expansion was driven by a surge in imports alongside a slight drop in exports, mainly within the merchandise trade segment, while services trade remained relatively stable.
How did India’s exports fare?
- India’s overall exports slipped by 0.7%, totalling $72.9 billion in October 2025.
- This decline stemmed from an 11.8% fall in merchandise exports, which fell to $34.4 billion. However, services exports recorded an 11.9% increase during the same period.
- Despite October’s weaker performance, India’s export situation over April–October 2025 remained positive, with total exports growing 4.8%, merchandise exports increasing 0.6%, and services exports rising 9.75%.
- India achieved its highest-ever export figures in both Q1 and Q2 of the financial year, primarily due to strong service-sector earnings.
- The key challenge for exports at the moment is the 50% tariff imposed by the U.S., which affects merchandise exports but not services.
Impact of U.S. tariffs
- The elevated U.S. tariffs imposed by President Donald Trump have clearly affected India’s shipments.
- Merchandise exports to the U.S. fell 20.4% in September 2025, the first full month of tariff enforcement, and have been declining since June.
- Although exports to the U.S. rose 15.4% in October compared to September, they still remained 8.6% lower than October last year. Exporters attribute the temporary rise to discounts and market diversification, though the tariff burden remains heavy.
Which sectors suffered most?
Several labour-intensive industries saw notable declines in October 2025:
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Leather goods (–15.7%)
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