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September 16, 2025 Indian Economy and Business: Trade Deficit Narrows, AI Set to Boost Growth, and US Trade Talks Resume

India's trade deficit significantly contracted in August 2025, driven by a surge in exports and a decline in imports. Meanwhile, NITI Aayog projects that Artificial Intelligence (AI) could add up to $1.7 trillion to India's economy by 2035, supporting the "Viksit Bharat" vision. India and the United States are set to resume trade talks in New Delhi, aiming to address recent tariff issues. The unemployment rate saw a dip in August, while wholesale and retail inflation showed an upward trend.

Trade Deficit Significantly Narrows in August 2025

India's trade deficit witnessed a substantial contraction of over 54% in August 2025, reaching $9.9 billion, down from $21.7 billion in August 2024. This improvement was attributed to a surge in merchandise exports, robust performance in services exports, and a notable reduction in merchandise imports. Total exports for August 2025 rose by 9.3% year-on-year to $69.2 billion. Merchandise exports specifically increased by 6.7% to $35.1 billion, while services exports grew to $34.1 billion. Concurrently, total imports decreased by 7% to $79 billion, with merchandise imports contracting by 10.1% to $61.6 billion. Non-petroleum, non-gems, and jewellery exports, a key indicator of underlying trade health, grew by 6.1% to $28.31 billion, primarily driven by strong performances in electronics (25.93%), engineering goods (4.91%), and drugs and pharmaceuticals (6.94%).

India and US Resume Trade Talks Amid Tariff Concerns

India is hosting US trade negotiators in New Delhi on September 16, 2025, for trade talks aimed at addressing recent tariffs imposed by the US on Indian goods. This meeting is a continuation of discussions following US President Donald Trump's imposition of tariffs, including a 25% penal levy on Indian goods due to continued oil trade with Russia. The tariffs have already impacted Indian exports, with shrimp exports from Andhra Pradesh reportedly facing a loss of Rs 25,000 crore and cancellation of up to 50% of export orders. India's exports to the US also saw a decline to $6.86 billion in August from $8.01 billion in July, underscoring the urgency of repairing trade ties.

AI Poised for Trillion-Dollar Boost to Indian Economy by 2035

A new report by NITI Aayog, titled "AI for Viksit Bharat: The Opportunity for Accelerated Economic Growth," estimates that Artificial Intelligence (AI) could add an extra $1 to $1.7 trillion to India's economy by 2035. This significant boost is expected to help India achieve its "Viksit Bharat" vision of sustained 8%+ annual growth, potentially raising the GDP to $8.3 trillion by 2035, compared to $6.6 trillion under the current growth trajectory. Key sectors like banking and financial services could see $50-55 billion in value from AI-enabled fraud detection and personalized services, while manufacturing could add $85-100 billion through predictive maintenance and smart factories. The report highlights that AI adoption across industries and transforming R&D with generative AI are major growth drivers.

Economic Indicators: Unemployment Dips, Inflation Rises

India's unemployment rate decreased for the second consecutive month in August, reaching a 4-month low of 5.1%. The participation of women in the workforce also rose to 32% in August from 30.2% in June. However, inflation saw an upward trend, with the Wholesale Price Index (WPI) inflation turning positive after two months, reaching 0.52% in August, primarily driven by food prices. Retail inflation also climbed to 2.1% in August, snapping a nine-month falling streak.

Other Key Business Developments

  • Union Minister Piyush Goyal reiterated India's ambition to become a $30 trillion economy by 2047, emphasizing inflation control and support for Micro, Small, and Medium Enterprises (MSMEs) through GST reforms.

  • India has emerged as the world's third-largest automobile market, surpassing Japan, with a target to claim the top spot within the next five years, as stated by Union Road Transport and Highways Minister Nitin Gadkari.

  • The Income Tax Return (ITR) filing deadline for Assessment Year 2025-26 was extended by one day to September 16.

  • The Production Linked Incentive (PLI) scheme for White Goods has reopened for applications for a period of 30 days, from September 15 to October 14, 2025.

  • Negotiations between India and the European Union are progressing towards finalizing a comprehensive Free Trade Agreement (FTA), aiming for balanced opportunities for businesses and consumers.

  • On September 15, Indian equity benchmark indices (Sensex and Nifty) closed in the red due to profit-booking in IT and automotive sectors, ahead of the US Federal Reserve's policy meeting. However, Asian stock markets were buoyant on September 16, driven by expectations of US Fed rate cuts.

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