In October, India's gold imports surged by 200%

India's gold imports in October reached a historic high of $14.72 billion, nearly tripling year-on-year, driving the country's merchandise trade deficit to a record $41.7 billion. This deficit data far exceeded market expectations, highlighting the impact of festive demand and U.S. tariffs on India's trade account.

According to data released by India's Ministry of Commerce on Monday, the country's gold imports in October saw a significant increase from $4.92 billion in the same period last year, with an increase of nearly 200%. Indian Commerce Minister Rajesh Agrawal attributed the surge in imports to festive demand. It is estimated that Indian consumers purchased $11 billion worth of gold during the five-day festive period in October.

The surge in gold imports led to India's merchandise trade deficit reaching a historic high of $41.7 billion in October, significantly exceeding the media survey estimate of $28.8 billion and surpassing the previous record of $37.8 billion set in November 2024. Rating agency ICRA Research warned that India's current account deficit as a percentage of GDP in the third quarter of the current fiscal year may widen to 2.4%-2.5%.

While gold imports set a record, the 50% tariffs imposed by the U.S. on Indian goods also began to show their effects. India's exports to the U.S. fell for the second consecutive month in October, down 8.5% year-on-year to $6.3 billion, with major export items such as gems, jewelry, and engineering products recording double-digit declines.

Festive Demand Drives Gold Imports to New Highs

India's gold imports in October reached $14.72 billion, nearly doubling from the same period last year. In the first seven months of the current fiscal year (April to October), total gold imports amounted to $41.23 billion, a year-on-year increase of 21.44%, higher than the $34 billion recorded in the same period last year.

Switzerland is India's largest source of gold imports, accounting for about 40%, followed by the UAE (over 16%) and South Africa (about 10%). Data shows that imports from Switzerland surged by 403.67% to $5.08 billion in October. In the first seven months of the current fiscal year, imports from Switzerland increased by 10.54% to $15.4 billion.

Gold accounts for over 5% of India's total imports. As the world's second-largest gold consumer, after China, India's gold imports primarily meet the demand of the jewelry industry. Currently, gold prices in New Delhi hover around ₹129,000 per 10 grams. Silver imports also saw a significant increase, with October imports jumping 528.71% to $2.71 billion.

Record Trade Deficit

High gold imports pushed India's merchandise trade deficit to a historic high of $41.7 billion. According to LSEG data, this figure broke the previous record of $37.8 billion set in November 2024.

ICRA Research's report released on Monday projected that as the festive season ends, gold imports are expected to decline month-on-month, along with a rebound in exports, and that India's merchandise imports in November and December "are expected to cool from October levels." However, the agency warned that India's current account deficit as a percentage of GDP in the third quarter of the current fiscal year (ending March 2026) will "significantly widen to 2.4%-2.5%." If the 50% tariff from the United States continues until the end of March 2026, ICRA expects the current account deficit of India for the fiscal year 2026 to be around 1.2% of GDP. In comparison, the current account deficit as a percentage of GDP for India in the first quarter of the fiscal year 2025-26 (April to June) was 0.2%, approximately USD 2.4 billion, down from 0.9% or USD 8.6 billion in the same period last year.

Impact of U.S. Tariffs on Export Performance

The impact of U.S. tariffs is clearly visible in trade data. Since the U.S. imposed a 50% tariff on Indian goods at the end of August, India's exports to the U.S. have declined for two consecutive months. In October, exports to the U.S. fell by 8.5% year-on-year to USD 6.3 billion.

Despite the decline, the U.S. remains India's largest export destination in the first seven months of this fiscal year, with exports amounting to USD 52 billion. The U.S. is also the primary export market for India's major products such as gems and jewelry, engineering products, cotton yarn, and ready-made garments.

In October, India's gems and jewelry exports amounted to USD 2.3 billion, a year-on-year decrease of 29.5%; engineering product exports were USD 9.4 billion, down 16.7%; and exports of cotton and synthetic yarns as well as ready-made garments fell by 12%-13%. Meanwhile, India's exports to China grew by 42% to USD 1.6 billion.

U.S.-India trade negotiations have been ongoing for several months, but no agreement has been reached so far. Both sides' positions have begun to soften, with U.S. President Trump hinting at a possible reduction in tariffs on India. To improve relations with the U.S., New Delhi has increased its purchases of oil and natural gas from the U.S. to narrow the trade surplus with the U.S., and it is expected to procure U.S. agricultural products as well