India’s July merchandise trade deficit touches $27.35 billion, an eight-month high

NEW DELHI: India’s merchandise trade deficit widened to an eight-month high $27.35 billion in July, as imports surged faster than exports, according to provisional data from the commerce ministry. Exports held up ahead of US tariffs set to take effect in late August, while imports surged, driven by higher demand for petroleum and crude products, electronic goods, and machinery.

In November 2024, India's trade deficit stood at $32.8 billion. Economists polled by Reuters had expected a deficit of $20.35 billion for July.

Earlier this month, President Donald Trump announced an additional 25% tariff on Indian goods, reportedly linked to New Delhi's trade with Russia, bringing total levies on Indian exports to 50% - among the highest of any US trading partner. The new duties are expected to kick in by 27 August, unless a breakthrough is reached during the ongoing 21-day negotiation window.

About half of India’s exports to the US could be affected, particularly labour-intensive sectors such as garments, leather, and gems and jewellery, according to Madan Sabnavis, chief economist at Bank of Baroda. Exports to the US account for roughly 2% of India’s GDP.

Merchandise exports rose to $37.24 billion in July from $35.14 billion in June, while imports climbed more sharply to $64.59 billion from $53.92 billion. 

The combined trade in goods and services in July stood at $68.27 billion in exports and $79.99 billion in imports, raising the overall trade deficit to $11.72 billion for the month, up from $3.51 billion in June and $10.10 billion a year ago. 

Services exports remained largely steady at $31.03 billion, slightly down from $32.84 billion in June, while services imports fell to $15.40 billion from $17.58 billion. In July 2024, services exports stood at $30.60 billion and imports at $15.94 billion.

Trade breakdown

Despite headwinds from global trade tensions, Indian exports have remained resilient, both in July and during the April-July FY26 period, commerce secretary Sunil Barthwal said. 

“The major drivers of merchandise exports were electronic goods, engineering goods, gems & jewellery, drugs & pharmaceuticals, organic and inorganic chemicals,” he added.

During April-July, merchandise exports rose 3% year-on-year to $149.20 billion, while imports climbed 5.36% to $244.01 billion. Key export categories included engineering products ($39.33 billion, up from $37.10 billion), electronic goods ($16.17 billion, up from $11.25 billion), and pharmaceuticals ($10.25 billion, up from $9.54 billion). Gems and jewellery exports slipped slightly to $9.05 billion from $9.12 billion, and petroleum products fell to $21.75 billion from $26.43 billion.

On the import side, petroleum and crude, electronic goods, and machinery remained the leading categories. China, the United Arab Emirates (UAE), Russia, the US, and Saudi Arabia were India’s top suppliers, while the US, UAE, the Netherlands, China, the UK, and Singapore remained the largest export destinations.

Non-petroleum exports during April–July reached $127.46 billion, up from $118.34 billion a year earlier, while non-petroleum imports rose to $179.18 billion from $165.57 billion.

Outlook

The global trade environment remains volatile. Indian exporters are navigating challenges such as higher US tariffs on Indian goods and disruptions from geopolitical uncertainties. The Strait of Hormuz, a vital corridor for Indian energy and container shipments, has seen delays, adding to supply-chain stress in recent months.

Meanwhile, the Export-Import Bank of India has projected that India’s merchandise exports will reach $108.1 billion in the July–September quarter of FY26, indicating that exports are likely to stay on track despite global uncertainties triggered by fresh US tariffs and trade tensions.

Non-oil exports are forecast at US$ 92.1 billion, while shipments excluding both oil and gems & jewellery are expected to stand at US$ 82.7 billion, reflecting a modest 2.3% year-on-year growth, according to the Exim Bank forecast released on Thursday.

The forecast comes at a time when exporters are grappling with higher duties in key markets, slowing global demand, and geopolitical strains. “Growth could be supported by a base effect, continued buoyancy in manufacturing activity, higher capacity utilisation, and supportive financial conditions, alongside favourable prospects from ongoing trade negotiations with multiple countries,” it said.

At the same time, the Exim bank cautioned that risks persist from global trade policy uncertainty, rising geo-economic fragmentation, and continuing geopolitical tensions.