Mumbai

Reserve Bank of India Governor Sanjay Malhotra on Wednesday said India’s merchandise exports contracted marginally by 0.2 per cent in the first two months of the year, while imports surged by over 22 per cent, leading to a widening trade deficit.

Speaking during the monetary policy announcement, Malhotra attributed the decline in exports to weakening demand in key global markets amid ongoing geopolitical tensions. “India's merchandise exports contracted by 0.2 per cent… while imports recorded a double-digit growth of more than 22 per cent, largely driven by higher gold imports,” he said.

The sharp rise in imports, particularly gold, has significantly outpaced export performance, exerting pressure on the country’s trade balance.

The central bank also flagged concerns over the global trade outlook, noting that growth is expected to slow in 2026 due to tariff-related uncertainties, elevated energy prices, and continued geopolitical conflicts, especially in West Asia.

According to the RBI, merchandise exports are likely to remain under strain in the near term due to disruptions in key shipping routes, higher freight and insurance costs, and subdued global demand.

However, Malhotra pointed out that exports could receive a boost from recently signed bilateral and regional trade agreements, many of which are currently being implemented or expected to come into force later this year.

Despite challenges in goods exports, services exports are projected to remain resilient, offering stability to India’s external sector. Strong services performance, along with steady inward remittances, is expected to keep the current account deficit within manageable levels.

At the same time, the RBI cautioned that rising global uncertainties and elevated energy prices pose upside risks to the current account deficit in the current year.

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Overall, while the external sector faces near-term headwinds, supportive factors such as robust services exports and trade partnerships are expected to cushion the impact.