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

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India’s gold imports in October reached a historic high, soaring nearly threefold year-on-year to $14.72 billion, pushing the country’s merchandise trade deficit to a record $41.7 billion. This deficit far exceeded market expectations and highlights the dual pressure from festive demand and US tariffs on India’s trade balance.

According to data released by the Indian Ministry of Commerce on Monday, the country's gold imports in October surged to $14.72 billion from $4.92 billion a year earlier, representing an almost 200% increase. Indian Commerce Secretary Rajesh Agrawal attributed the import surge to festive demand. It is estimated that Indian consumers purchased $11 billion worth of gold during the five-day festival period in October.

Driven by surging gold imports, India’s merchandise trade deficit in October hit a new high of $41.7 billion, far exceeding media survey estimates of $28.8 billion and surpassing the previous record of $37.8 billion set in November 2024. Ratings agency ICRA Research warned that India’s current account deficit as a percentage of GDP may widen to 2.4%-2.5% in the third quarter of the current fiscal year.

While record gold imports are being set, the impact of the US’s 50% tariff increase on Indian goods is becoming apparent. In October, India’s exports to the US fell for the second consecutive month, down 8.5% year-on-year to $6.3 billion, with major export products such as gems, jewelry, and engineering goods all recording double-digit declines.

Festive Demand Drives Record Gold Imports

India’s gold imports in October reached $14.72 billion, nearly double those of the same period last year. In the first seven months of the fiscal year (April to October), cumulative gold imports totaled $41.23 billion, a 21.44% increase over last year’s $34 billion for the same period.

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 in October surged 403.67% to $5.08 billion. During the first seven months of the fiscal year, imports from Switzerland rose 10.54% to $15.4 billion.

Gold accounts for over 5% of India’s total import value. As the world’s second-largest gold consumer after China, India’s gold imports mainly meet the needs of the jewelry industry. Currently, gold prices in New Delhi hover around Rs 129,000 per 10 grams. Silver imports also saw a significant jump, soaring 528.71% in October to $2.71 billion.

Record Trade Deficit

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

In a report released Monday, ICRA Research predicts that with the end of the festive season, gold imports will fall month-on-month and exports will rebound, so India’s merchandise imports in November and December "are expected to cool down somewhat relative to October levels." However, the agency warns that India’s current account deficit as a percentage of GDP for the third quarter of the current fiscal year (ending March 2026) will "widen significantly to 2.4%-2.5%."

If US tariffs of 50% continue through the end of March 2026, ICRA expects that India’s current account deficit as a share of GDP for fiscal 2026 will be around 1.2%. In comparison, the current account deficit as a percentage of GDP for Q1 of the 2025-26 fiscal year (April-June) was 0.2%, about $2.4 billion, much lower than the 0.9% or $8.6 billion of the same period last year.

US Tariff Hits Export Performance

The impact of US tariffs is clearly visible in the trade data. Since the US imposed a 50% tariff on Indian goods in late August, India’s exports to the US have declined for two consecutive months. In October, exports to the US fell 8.5% year-on-year to $6.3 billion.

Despite the decline, the US remains India’s largest export destination for the first seven months of the fiscal year, with exports totaling $52 billion. The US is also the main export market for Indian gems and jewelry, engineering products, cotton yarn, and garments.

In October, India’s gem and jewelry exports fell to $2.3 billion, down 29.5% year-on-year; engineering product exports were $9.4 billion, down 16.7%; cotton and synthetic yarn, as well as garments, fell about 12%-13%. Meanwhile, India’s exports to China grew 42% to $1.6 billion.

US-India trade negotiations have been ongoing for months but have yet to reach an agreement. Both sides are starting to soften their positions, with US President Trump suggesting tariffs on India may be lowered. In a goodwill gesture, New Delhi has increased purchases of US oil and natural gas to narrow the trade surplus with the US, and is expected to also buy US agricultural products.

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