Mumbai (Maharashtra) [India], April 8 : Reserve Bank of India (RBI) Governor Sanjay Malhotra on Wednesday said India's merchandise exports contracted by 0.2 per cent in the first two months of the year, while imports recorded a sharp growth of more than 22 per cent, largely driven by higher gold imports, resulting in a widening trade deficit.
Speaking during the monetary policy announcement, the Governor highlighted that the decline in exports was due to a contraction in key global markets amid ongoing geopolitical tensions and weakening global demand.
He stated, "India's merchandise exports contracted by 0.2 per cent during the first two months of this year on a year-on-year basis. This was a result of export contraction in key markets. Merchandise imports, on the other hand, recorded a double-digit growth of more than 22 per cent. This was largely driven by higher gold imports".
He noted that the surge in imports, particularly due to increased gold imports, significantly outpaced export performance, putting pressure on the trade balance.
The central bank also said that global trade is expected to slow in 2026 compared to 2025, driven by lingering tariff-related uncertainties, the ongoing West Asia conflict, and elevated energy prices.
The RBI further pointed out that merchandise exports are likely to remain under pressure due to disruptions in key shipping routes, higher freight and insurance costs, and subdued global demand resulting from the conflict.
However, the Governor added that exports could receive support from recent bilateral and regional trade agreements signed with major trading partners. Many of these agreements were signed last year and are currently being implemented, while others are expected to become operational later this year.
Despite the weakness in merchandise exports, services exports are expected to remain resilient, providing stability to the external sector.
The RBI also said that strong services exports and steady inward remittances during the fourth quarter of last year are expected to keep India's current account deficit moderate and within sustainable levels.
At the same time, the central bank cautioned that rising global uncertainties and elevated prices of key energy commodities pose upside risks to the current account deficit in the current year.
Overall, while the external sector is facing near-term challenges due to global headwinds and rising import costs, supportive factors such as services exports and trade agreements are expected to help cushion the impact.
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