Blasé Capital jaded TRADE

Despite the great fall of the rupee in the past few months, and especially in November-December, there is a spot of good news on the trade front. In November 2025, unlike the previous month, the trade deficit shrank by a sixth to less than $25 billion, down from nearly $42 billion. While most of the credit for the lower deficit goes to lower imports, especially of gold, crude oil, and coal, merchandise exports seem to be a good wicket. The latter were up nearly 20 per cent year-on-year to more than $38 billion. This possibly indicates a mix of two trends. One, Indian exporters have successfully, probably temporarily, managed to find new markets to make up for the lower sales to America due to the 50 per cent tariff. Two, Indian exports have massively gained due to the falling rupee, even though a large portion of the exports are designated in dollars. This implies that the foreign buyers have extracted their pound of flesh, forced the Indians to lower prices, and ordered higher-than-usual volumes.

The first trend is visible from the sub-trends in crucial export segments like shrimps, and gems and jewellery. Both these were expected to be hit hard due to the American tariff. According to an industry forum, and not the official figures, gems and jewellery recorded exports of $2.5 billion in November 2025, up nearly 20 per cent year-on-year. According to the association, demand has perked up in Hong Kong, China, and the Middle East. In the seafood (especially shrimps) segment, exports remain unaffected due to the US tariff because of new markets in Australia (access after eight years), the European Union (reentering after a decade), Russia, and other emerging markets. However, the gems and jewellery figures for the April-November 2025 remain flat, or the same compared to the same period in the previous year. Unless the November figures are sustained, they may be one-off due to other factors. Similarly, the exports of sea foods are tricky business, and a few instances of quality issues can derail shipments to the new markets.

If one looks closely at what has happened in the shrimp and jewellery segments, there are indications that the rupee downfall against the dollar may be playing a crucial part. Most of the new markets for jewellery seem to be Hong Kong, and the Middle East, which may be only transit nations for re-exports to other nations. If this is true, then the new buyers may have gotten into the fray because of the attractive price factor, or lower prices offered by the Indian sellers, which keeps enough margins for re-exports. Once the third quarter financials are announced in January-February, one will have a clearer idea of whether the higher exports are driven by the top line, or are combined with better bottom lines. One will need to look at the corporate performances to gauge similar patterns in other export-oriented sectors. If one witnesses pressures on profits, which result in lower profits, the export stories can be deemed to be a partial success. Once established, it is difficult to get price revisions for a long time.

Over the next few months, one of the largest drivers of both exports and imports, which may yield mixed results for the trade deficit, will be the spate of free trade deals that India has inked, or is in the process of inking with other nations, regions, and groups. Of them the India-US bilateral deal is only one. Similar deals were signed with others, which have opened new markets, or better access in existing ones, for the Indian exporters. Obviously, imports from these nations will go up, and impact domestic prices due to attractive import duties. Hence, one is likely to witness wild gyrations in specific exports to specific areas, as Indian exporters are better able to sell their goods in some months, and the foreigners do the same in other months. Things are likely to stabilise over 6-12 months, and only then will one figure out if the trade deals are more beneficial to Indian exports or imports. In either case, some firms will benefit, and others will be losers. This will change the corporate dynamics.

Another reason why one cannot be sure of the November 2025 figures, and whether they are sustainable is because of the exports to the US. During the month, despite the high tariff, exports to the US rose by an unbelievable 21 per cent year-on-year to $5.71 billion. This was quite a contrast from October 2025 when, as expected, American exports fell by nine per cent year-on-year to just over $6 billion. It is interesting that despite the fall, the numbers for October 2025 were higher than the November 2025 figures in quantitative terms. On an overall basis, merchandise exports grew by more than 10 per cent month-on-month basis, or less than $4 billion, and imports declined quite sharply by almost $13.5 billion, or 16 per cent or so. Media reports indicate that the monthly trends for services remain in India's favour. In November 2025, the services trade surplus was almost $18 billion, as exports touched nearly $36 billion.