India’s trade deficit for February narrowed to a three-and-a-half-year low of $14.05 billion, with an overall surplus of $5 billion when including services. However, the sharp drop in goods imports raises concerns about a potential slowdown.

Both exports and imports fell, with exports declining 11% to $36.91 billion and imports dropping 16% to $50.96 billion.

The steep fall in imports was driven by lower purchases of petroleum (down 30%), iron & steel (down 23%), transport equipment (down 17%), and gold (down 62%).

Officials attributed the decline to lower commodity prices, but the sharp drop suggests a slowdown, reinforced by weak manufacturing and auto sales.

However, services exports grew 24%, strengthening the rupee, which closed at 86.80/$ on Monday.

Economists now expect a current account surplus of $20 billion for January-March, lowering the full-year deficit forecast to 0.7% of GDP, though US tariffs in April could pose risks.

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