India trade deficit hits $28.38bn as oil bill jumps

What changed in April trade data

India’s trade deficit widened sharply in April to $18.38 billion, up from $10.6 billion in March, government data showed. The widening was driven mainly by a higher import bill, with crude oil flagged as a key contributor. The backdrop was an escalation in West Asia, with the report citing the US-Israel-Iran war as a factor that disrupted supplies and pushed crude prices higher. A higher oil import bill typically feeds into a wider merchandise gap, increasing pressure on the external balance. The data point matters because it arrives alongside signs of a weaker currency environment and concerns around capital flows.

Why crude oil is back at the centre of the deficit

India’s import mix is sensitive to global energy prices because crude oil is a large component of total imports. The report links April’s wider deficit to higher crude prices triggered by conflict-led disruption. When crude rises, refiners and downstream consumers pay more in dollar terms, and the gap between goods imports and exports expands unless exports rise at the same pace. This dynamic can also intensify pressure on the rupee because more dollars are needed to pay for imports. The article frames the situation as an external-sector stress episode rather than a one-off monthly fluctuation.

Modi’s austerity message as an early macro signal

Prime Minister Narendra Modi urged citizens to adopt austerity measures, asking them to cut back on gold purchases, foreign travel, and petroleum consumption. A separate report cited in the article, from JM Financial Institutional Securities, described the messaging as “signalling before actual measures” amid rising external vulnerabilities linked to the West Asia conflict. The piece argues that the repeated public appeal is not only moral messaging but an early warning that policymakers may be preparing the ground for stronger steps if conditions worsen. The external sector is described as being under stress from higher crude prices, gold imports, and foreign exchange outflows linked to travel.

Current account deficit (CAD) comes back into focus

The report places the current account deficit (CAD) at the centre of the policy concern. It notes that heavy dependence on imported gold can increase the CAD, which measures the gap between imports and exports of goods and services. According to RBI data cited, India’s CAD widened to $13.2 billion, equivalent to 1.3% of GDP, during the December quarter of 2025. The article also says the CAD is projected to inch towards 2% of GDP in FY27 if elevated crude prices persist and the West Asia crisis intensifies.

JM Financial’s downside scenario: growth and CAD risk

JM Financial warned that if supply disruptions continue, India could face slower growth and worsening current account pressures. The brokerage stated that if disruption sustains for a few more weeks, it would stick to its worst-case scenario of GDP growth moderating to 6% to 6.5% and CAD deteriorating to 1.9% of GDP. These figures are presented as a scenario linked to the duration of supply disruption rather than a baseline forecast. The framing underscores that the risk channel runs from crude supply and pricing into the trade balance, and then into the CAD.

The structural layer: China gap crosses $100 billion

Beyond oil, the article flags structural dependence in trade flows. It notes that India’s trade gap with China crossed $100 billion for the first time, reaching $102 billion during April–February, up from $11.1 billion a year earlier. The report describes this as evidence of a structural imbalance that policy tweaks alone have not corrected. It also points to the need to accelerate domestic manufacturing in critical intermediate goods such as electronics components, machinery, and chemicals, where import dependence is high.

February snapshot: deficit and trade flow shifts

The report also references February data to show the volatility and breadth of the imbalance. In February, the deficit nearly doubled to $17 billion from $14.42 billion a year earlier. Imports surged 24%, while exports slipped 0.81% to $16.61 billion. The article adds that the gap narrowed from January’s $14.68 billion, offering a limited near-term breather. It also cites comments that March was expected to be “challenging” due to logistics bottlenecks linked to the Gulf conflict, reflecting how disruptions can raise shipping and insurance costs and affect delivery timelines.

December 2025: services surplus cushions the merchandise gap

Official data for December 2025 showed the merchandise trade deficit edging higher to $15.04 billion from $14.53 billion in November. Merchandise exports grew 1.8% year-on-year to $18.51 billion, while imports rose 8.7% to $13.55 billion. The article notes that the deficit was lower than a Reuters poll expectation of around $17 billion. Services trade provided a buffer: services exports were estimated at $15.50 billion and imports at $17.38 billion, generating a surplus of $18.12 billion. For April–December 2025, merchandise exports rose 2.44% to $130.29 billion.

What markets watch: rupee, tariffs, and policy tools

The article links the external picture to currency and trade-policy pressures. It notes that exporters are facing reciprocal tariffs, some reaching 50%, including a 25% tariff linked to Russian crude purchases, adding costs and uncertainty. It also says the rupee fell by nearly 5% year-on-year, marking a record low, while the RBI limited intervention to allow depreciation to aid exports and preserve reserves. On the policy toolkit, the report outlines potential steps if stress deepens: higher duties on non-essential imports, tighter scrutiny of outward remittances, administrative measures to curb discretionary forex spending, and stronger incentives to attract foreign capital inflows.

Key numbers at a glance

Conclusion

April’s wider trade deficit underscores how quickly a crude-led import shock can reopen concerns on the external balance, especially when combined with high gold imports and weak capital flows. With CAD already tracked closely and scenario risks flagged by brokerages, official messaging has shifted toward conserving foreign exchange. The next set of signals for investors is likely to come from how long supply disruptions persist, how the rupee behaves under pressure, and whether policy steps move from public appeals to formal measures.