NEW DELHI : A sharp rise in imports pushed India’s trade deficit to a five-month high in June, even as growth in merchandise exports remained healthy, according to commerce ministry data released on Monday. The merchandise trade deficit widened to $30.43 billion in June as exports fell faster than imports, weighed down by shipping disruptions in the Strait of Hormuz linked to Middle East conflict.
Exporters’ bodies have flagged concerns over global demand softness, particularly from Western markets, as a drag on growth in outbound shipments.
The trade deficit widened to $30.43 billion in June from $28.21 billion in May and $19.10 billion a year earlier. Goods imports jumped 31 per cent year-on-year (Y-o-Y) to $70.84 billion in June, while exports rose nearly 16 per cent to $40.41 billion, driven by strong engineering and electronic goods exports and a recovery in shipments to West Asia.
The commerce ministry estimated services exports at $33.03 billion in June, up nearly 3 per cent Y-o-Y, while services imports were estimated to have risen nearly 13 per cent to $17.92 billion. This resulted in an estimated services trade surplus of $15.11 billion. The Reserve Bank of India (RBI) is expected to release the final services trade data later this month.
Commerce Secretary Rajesh Agrawal attributed the surge in merchandise imports to higher prices of commodities such as crude oil, electronic goods, and gold.
India’s crude oil imports rose 40 per cent Y-o-Y to $19.33 billion in June, while electronic goods imports jumped 59 per cent to $13.36 billion. Gold imports increased 7 per cent to $1.97 billion.
Raw cotton imports nearly tripled, albeit on a low base, to $185.08 million after the government waived import duty on the commodity. Fertiliser imports also tripled to $2.30 billion during the month.
Among exports, engineering goods shipments grew 21 per cent Y-o-Y to $11.48 billion, while electronic goods exports rose 19 per cent to $4.93 billion. Petroleum product exports increased 9 per cent to $4.87 billion.
Agrawal said exports to West Asia recovered during the month, rising 7 per cent Y-o-Y to $5 billion. He added that Singapore, Malaysia and trade partners in Africa remained among India’s top export destinations in June.
The US remained India’s largest export market, although exports edged down to $8.17 billion in June from $8.27 billion a year earlier.
The number of vessels transiting the Strait of Hormuz fell to multi-week lows on Sunday as renewed strikes between the U.S. and Iran and attacks on ships heightened safety concerns. The violence casts doubt on the future of an interim U.S.-Iranian agreement signed last month. Economists had expected India’s trade deficit to widen to $26.63 billion in June, according to a poll, compared with a deficit of $28.21 billion in May.
China continued to be India’s largest import source, with imports rising 40 per cent Y-o-Y to $13.34 billion in June. Exports to China also increased nearly 32 per cent to $1.81 billion.
India’s cumulative merchandise exports rose 16 per cent Y-o-Y to $129.32 billion in the April-June quarter (Q1) of FY27, while imports increased 20 per cent to $216.18 billion. The merchandise trade deficit stood at $86.86 billion during the quarter.
Upasna Bhardwaj, chief economist at Kotak Mahindra Bank, said the widening of the trade deficit in June was largely driven by higher net imports of oil and electronics. “However, exports continue to hold firm. We continue to monitor oil prices going ahead for any risks to our CAD (current account deficit)-to-GDP ratio of 1.5 per cent. Overall, RBI’s forex measures are expected to cushion risks to the balance of payments surplus,” she said.
Aditi Nayar, chief economist at Investment Information and Credit Rating Agency (Icra), said she expects India’s current account deficit to widen to at least 1 per cent of GDP in FY27.
