Merchandise Exports to Moderate to $110 Bn in Sept Qtr

 Chennai: The merchandise exports in the ongoing September quarter are expected to moderate to a three-quarter low of $110 billion. Global services activity too has been impacted by uncertainties, and these will push the current account deficit to a three-quarter high.

The punitive US tariffs have made India one of the countries with highest tariff rates. India’s competitors such as Thailand, Vietnam, and China are better placed with lower tariffs. This would impact our labour-intensive industries such as leather, footwear, textiles, gems and jewellery and shrimp.

However, the pause in the tariff order gave some relief and led to pre-emptive orders, in view of the impending changes in trade policy. The reciprocal tariffs came into effect in the first week of August and the punitive tariffs in the last week of August.

Still, the merchandise exports to moderate to a three-quarter low of around $110 billion in 2QFY26. Merchandise exports for Q1 FY26 stood at $112.17 billion. In Q2, merchandise imports are expected to increase to around $189 billion due to a steady domestic demand, finds India Ratings.

Overall, Ind-Ra expects the goods trade deficit to be around $78 billion in 2QFY26. The impact of the unprecedented global uncertainty has been felt on the services activity, which has been outside the gambit of tariffs. The services trade surplus is expected to increase to around $50 billion in Q2 FY26 against $47.9 billion in Q1FY26.

The current account balance (CAB) may remain in a deficit of around $10 billion or 1 per cent of the GDP in Q2 FY26. This will be a three-quarter high. It returned to a deficit of $2.4 billion in Q1 FY26. CAB was in a surplus of $13.5 billion in Q4 FY25 or 1.3 per cent of GDP. The current account deficit in Q1FY26 was the lowest since FY23.