India’s merchandise trade deficit (MTD) nearly doubled to $27.1 billion in February 2026 from $14.4 billion in February 2025, driven by the strong growth in imports (+24.1%) on a year-on-year (YoY) basis, even as exports (-0.8%) remained weak. Rising commodity prices would impact the landed cost of imports in the ongoing month, although volumes of some items may be constrained on account of the disruption caused by the West Asia conflict. The widening in the merchandise trade deficit (MTD) in January-February 2026 implies that the seasonal improvement in current account balance that is typically seen in Q4 every year, is unlikely to play out in Q4 FY2026. ICRA expects the current account to witness a deficit of ~$9-11 billion in Q4 FY2026 (vs. $13.2 billion in Q3 FY2026), in contrast with the surplus of $13.7 billion seen in Q4 FY2025, thereby pushing the current account deficit (CAD) to ~1.0% of GDP in FY2026 (0.6% of GDP in FY2025).

• MTD nearly doubled on a YoY basis in February 2026: India’s merchandise imports remained substantial at $63.7 billion in February 2026, amid a 42-month high YoY expansion of 24.1%, albeit partly on the back of a low base (-15.7% in Feb 2025), and strong growth in gold imports. On the contrary, merchandise exports eased by ~1% YoY to $36.6 billion in February 2026. Consequently, the MTD widened sharply to $27.1 billion in February 2026 from $14.4 billion in February 2025 even as it stood lower than $34.7 billion in January 2026. The near doubling in YoY terms was largely led by non-oil items (to $17.6 billion from $8.2 billion, led by gold) followed by a rise in net oil imports (to $9.5 billion from $6.2 billion).
• Exports to most major economies moderated in February 2026: The exports to the US contracted for the third consecutive month in February 2026 (-12.9% YoY), attributed to high base of pre-tariff frontloading of shipments in 2025. In addition, shipments to the UK (-5%), the UAE (-0.3%) and Saudi Arabia (-10.4%) dipped on a YoY basis in the month; trade disruptions in the latter two countries may worsen the trend in the ongoing month.