Merchandise export growth remained strong in August, helping narrow India’s trade deficit to $26.9 billion from $32.0 billion in July. It rose 26.1 per cent YoY, while imports increased 14.1 per cent.
However, exports of ready-made garments (RMG) of all textiles contracted 2.7 per cent YoY in August, indicating continued pressure on India’s apparel export performance. Exports to the US and China increased 21.8 per cent and 52.4 per cent, respectively, while exports to 17 of India’s 20 major destinations expanded. Exports to West Asia continued to contract.
India’s economy grew 7.8 per cent year on year in Q1 2026-27, while merchandise exports rose 26.1 per cent in August and the trade deficit narrowed to $26.9 billion.
However, ready-made garment exports fell 2.7 per cent, with inflation, energy costs and geopolitical tensions continuing to weigh on textile and apparel sourcing, adding to uncertainty for industry players.
The RBI noted that domestic demand remained firm in August, with consumption and investment supporting overall economic activity. For manufacturers and sourcing businesses, the combination of resilient domestic demand and strong merchandise export growth provides a firmer macroeconomic backdrop, although the decline in RMG exports highlights continued challenges for the textile and apparel sector.
Headline CPI inflation rose to 4.8 per cent in August, driven by the food and beverages group as well as higher fuel and core inflation. The RBI Bulletin also noted that global geopolitical tensions, trade fragmentation, energy supply disruptions and broader cost pressures continued to weigh on financial markets and business confidence.
Renewed conflict in West Asia pushed energy prices higher, raising inflation concerns across advanced and emerging market economies. Financial markets also turned volatile in September amid geopolitical tensions and higher oil prices, adding to concerns over the balance between economic growth and inflation.
India’s external sector remained supported by a moderate current account deficit in Q1 2026-27 and strong foreign direct investment (FDI) flows. Net FDI in July rose to its highest monthly level in five years, while net inflows under non-resident deposits increased sharply.
Foreign exchange reserves reached an all-time high of $765.9 billion as of September 18, providing additional external-sector support.
Fibre2Fashion News Desk (CG)
