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Credit rating agency Crisil in its latest report has said that a fall in the prices of crude oil, which is one of India's top export items, is impacting oil exports, leading to a contraction in the country's overall exports in August. The report further highlighted that imports have surged faster than exports, contributing to a broader trade deficit.  According to the report, while the fiscal year commenced positively with merchandise exports growing steadily in the first quarter, growth slowed by July and August, resulting in a contraction. Factors like container shortages have disrupted major trade routes, exacerbating the decline.

The rating agency further said that in addition to these challenges, the US has announced plans to increase tariffs on Chinese goods, further affecting global trade flows. The report said that the situation involving US tariffs on Chinese goods is a key concern, as it is expected to have a broader impact. The slowdown in China's economy may also be leading to an increase in Chinese exports being dumped in the Asian market, including India.

For example, the report noted a significant rise in the import of steel from China and Vietnam in recent months, which could further widen India's merchandise trade deficit. Despite these challenges, the report pointed out that there are positive factors that could help offset the growing trade deficit. India's services trade continues to show a surplus, and the country is experiencing strong inflows of remittances from overseas workers. These factors offer some comfort and are expected to help maintain India's current account in a stable position, even as the merchandise trade deficit increases.