India’s merchandise trade gap widens to a six-month high of $31.98 bn in July

New Delhi: India’s merchandise trade deficit widened to a six-month high of $31.98 billion in July, from $27.88 billion a year earlier, as the rise in imports outpaced the export gains in absolute terms. Imports rose 17.5% to $76.22 billion, while exports increased 19.6% to $44.24 billion, provisional commerce ministry data released on Thursday showed.

For April-July, the first four months of the fiscal, merchandise exports rose 17.04% to $173.78 billion from $148.48 billion a year ago, while imports increased 19.27% to $292.38 billion from $245.14 billion. The merchandise trade deficit, thus, widened to $118.60 billion, from $96.66 billion in the year-ago period.

Including services, India’s total exports in July were estimated at $80.14 billion, up 13.3% from $70.72 billion a year earlier. Total imports rose 15.8% to $95.16 billion, taking the overall trade deficit to $15.03 billion from $11.43 billion.

For April-July, total exports of merchandise and services were estimated at $316.42 billion, up 13.2% from $279.63 billion, while total imports rose 17.3% to $365.85 billion. The cumulative overall trade deficit consequently widened to $49.43 billion, from $32.32 billion a year ago.

Aditi Nayar, chief economist at Icra Ltd, said merchandise exports and imports had expanded at double-digit rates for the fourth consecutive month in July, largely reflecting elevated commodity-price inflation that boosted trade values.

“Merchandise imports touched the highest level in nine months, boosted by a 20%-plus expansion in items like coal, fertilizers, electronic goods, and chemical materials and products,” Nayar said. “Merchandise trade deficit widened to a slightly higher than expected six-month high of $32.0 billion in July 2026 from $27.9 billion in the year ago month, while also exceeding the average monthly print of $29.0 billion seen in Q1 FY27.”

“While we expect a marginal CAD (current account deficit) of ~0.2% of GDP in Q1 FY2027, the same is expected to widen sharply to ~2.0% of GDP in Q2 FY2027. Overall, we expect the CAD to print at a benign 0.9% of GDP in FY2027, which is likely to be comfortably financed, amid the RBI’s (Reserve Bank of India) measures to attract capital flows, leading to an accretion to reserves in the fiscal,” Nayar said.

India's services exports for April-July were estimated at $142.64 billion, compared with $131.15 billion a year earlier, while services imports were estimated at $73.47 billion, compared with $66.81 billion, as per commerce ministry data. The services trade surplus was at $69.17 billion, compared with $64.35 billion a year ago.

Imports

Within the import basket, gold rose 4.8% year-on-year to $4.16 billion in July, from $3.97 billion a year ago. Gold imports during April-July rose 32.4% to $15.17 billion, from $11.46 billion in the corresponding period of 2025-26.

Silver imports, however, moved sharply the other way. Imports of the metal plunged 66.1% to $171.7 million in July, from $506.4 million a year earlier. During April-July, silver imports fell 50.8% to $718.4 million, from $1.46 billion.

Imports of crude oil, petroleum, and products rose 17.6% to $18.31 billion in July, from $15.56 billion a year earlier. During April-July, these imports rose to $78.92 billion from $64.84 billion. Fertilizer imports, meanwhile, jumped 55.4% to $2.48 billion in July and 71% during April-July to $6.32 billion.

Electronic goods imports rose 46% to $14.37 billion in July, from $9.84 billion a year earlier, and rose to $52.82 billion during April-July from $36.58 billion.

Exports

As for exports, those of engineering goods rose 17.7% year-on-year to $12.24 billion in July, from $10.40 billion a year ago. During April-July, their exports rose 18.2% to $46.38 billion, from $39.24 billion.

Petroleum-products' exports jumped 67.64% to $6.92 billion in July, from $4.13 billion a year earlier. India's shipments of organic and inorganic chemicals rose 14.4% to $2.80 billion from $2.45 billion, while cotton yarn, fabrics, made-ups and handloom products export rose 8.40% to $1.11 billion from $1.02 billion a year ago.

Electronic goods rose 57.4% to $5.92 billion, from $3.76 billion a year ago.

Engineering goods exports grew 17.8% year-on-year to $12.24 billion in July. Cumulatively, engineering shipments recorded 18.2% growth during April-July to $46.38 billion, against $39.24 billion a year ago.

Other commodities that saw strong export growth in July included iron ore (78.35%), meat, dairy and poultry products (40.84%), cashew (25.11%), marine products (17.83%), handicraft, excluding hand-made carpets (15.55%), plastic and linoleum (11.01%) and cereal preparations and processed items (9.51%).

Export of drugs and pharmaceuticals rose 0.7%, while manmade yarn, fabrics and made-ups rose 0.45%.

Non-petroleum exports rose 13.6% to $37.32 billion in July, while those of non-petroleum and non-gems-and-jewellery rose 14.9% to $35 billion. During April-July, non-petroleum exports rose 12.8% to $143.61 billion.

Some categories saw a decline in exports during the reporting month. These included readymade garments of all textiles, spices, rice, tea and oilseeds.

Export markets

In the month of July, India's export destinations showing the highest year-on-year growth were: the US (12.85%), China (64.57%), Singapore (83.7%), Kenya (151.41%) and Malaysia (73.03%), the data showed.

For April-July, the export destinations showing the highest year-on-year growth were: Singapore (97.11%), China (35.97%), Tanzania (131.2%), South Africa (69.75%) and Sri Lanka (111.76%).

On the import side, the highest growth-clocking markets in July were: Russia (83.85%), China (34.42%), Oman (150.36%), Taiwan (111.3%) and the US (18.11%).

In April-July, imports from Russia rose 59.65%, China 29.68%, Oman 200.68%, the US 22.42% and Brazil 166.84%.

Data takeaways

On the overall trade data, experts flagged the disruptions emanating from the ongoing US-Iran war. “The widening trade deficit points to emerging pressures from higher energy-sourcing, freight and logistics costs, particularly if these disruptions persist,” said Ram Singh, professor and head at Indian Institute of Foreign Trade, New Delhi.

He, however, pointed to the country's resilience. “Overall, India’s July 2026 trade performance provides measured grounds for optimism, reflecting underlying economic strength despite intensifying geopolitical fragmentation and growing uncertainty in the global trade and tariff environment.”

Pankaj Chadha, chairman of EEPC India, said engineering exports continued their growth run despite persistent external challenges, geopolitical tensions and trade-route disruptions. “Despite persistent external challenges, geopolitical tensions, and trade route disruptions, the engineering exports sector continued its growth run in July 2026. This shows the sector's resilience and how globally competitive we are,” he said.

“The impressive growth in engineering goods exports during April-July also demonstrates how engineering exporters have adapted to emerging challenges and diversified their product portfolio and markets,” he said. “We are hopeful of navigating the crisis and registering positive growth in the coming months.”

The positive impact of the India-Oman free trade pact was already visible, while the free trade pact with the UK was expected to give a further push to exports, he said. Together, they would partly offset the negative trend seen in some traditional markets.