India's trade deficit soared to a six-month high of $31.98 billion in July, propelled by a significant surge in imports of crude oil, electronic goods, coal, and fertilisers, according to recent commerce ministry data.
Key Points
- India's trade deficit surged to a six-month high of $31.98 billion in July, up from $30.42 billion in June and $27.88 billion a year prior.
- Imports of goods reached a nine-month high of $76.22 billion in July, while goods exports jumped nearly 20 per cent to $44.24 billion.
- Elevated commodity prices, especially for crude oil, electronic goods, coal, and fertilisers, were key drivers behind the sharp increase in imports.
- Services exports were estimated at $35.89 billion, a 6 per cent year-on-year increase, resulting in an estimated services trade surplus of $16.95 billion.
- Experts caution that while imports of energy and capital goods are linked to economic activity, India needs to strengthen domestic manufacturing to reduce import dependence and manage the widening current account deficit.
A sharp rise in imports in July pushed up India’s trade deficit for the month to a six-month high of $31.98 billion even as both merchandise exports and imports hit their second-highest levels in the same period, according to the data from commerce-ministry data released on Thursday.
The trade deficit stood at $30.42 billion in June and $27.88 billion in July a year earlier.
Imports of goods in July rose to a nine-month high at $76.22 billion while goods exports jumped nearly 20 per cent to $44.24 billion during the month.
The commerce department said the rise in exports was owing to elevated prices and a swift rebound in shipments to West Asia following disruption amid the United States-Iran war.
Services Trade and Key Import Drivers
The department estimated services exports at $35.89 billion in July, up a little over 6 per cent year-on-year (Y-o-Y), while services imports were estimated to have risen nearly 10 per cent to $18.94 billion.
This resulted in an estimated services trade surplus of $16.95 billion.
The Reserve Bank of India (RBI) is expected to release the data on final services trade later this month.
Elevated commodity prices led to the sharp jump in imports in July with crude oil, electronic goods, coal, and fertiliser shipments being the key drivers.
India’s imports of crude oil rose nearly 18 per cent Y-o-Y to $18.31 billion in July, while that of electronic goods jumped 46 per cent to $14.37 billion.
Fertiliser imports grew a little over 55 per cent to $2.48 billion and coal shipment increased 29 per cent to 3.05 billion. India’s gold imports were $4.16 billion in July, up nearly 5 per cent Y-o-Y. Inward shipments of chemicals also surged nearly 22 per cent to $1.22 billion.
Export Performance and Regional Trade
Among exports, those of engineering goods grew nearly 18 per cent Y-o-Y to $12.24 billion, while outward shipments of electronic goods rose 57 per cent to $5.92 billion.
Exports of petroleum products increased nearly 68 per cent to $6.92 billion.
“After a sharp dip in March, India’s merchandise trade with West Asia rebounded swiftly, with merchandise export growth maintaining strong momentum through June and July,” the commerce ministry said. India’s exports to West Asia inched to $5.70 billion in July from $5.24 billion a year ago.
Imports from the region, however, were $9.81 billion, down nearly 21 per cent Y-o-Y.
The United States (US) remained India’s top export market in July with exports rising nearly 13 per cent Y-o-Y to $9.02 billion.
India’s outward shipments to the US have registered growth in July after falling in each of the last two consecutive months.
China continued to be India’s largest import source, with inward shipment increasing a little over 34 per cent Y-o-Y to $14.67 billion in July.
Exports to China also jumped 65 per cent to $2.20 billion.
Imports from Russia nearly doubled to $8.91 billion in July from $4.84 billion recorded in the same month a year ago, led by crude-oil imports.
Expert Concerns and Economic Outlook
Experts had a word of caution on the rising import bill and the widening trade deficit.
“While imports of energy, capital goods and intermediates are also associated with higher domestic economic activities, we need to simultaneously strengthen domestic manufacturing capabilities in critical inputs, electronics, machinery and other areas of high import dependence.
"Export expansion and strategic import substitution should complement each other in strengthening India’s external sector,” Federation of Indian Export Organisations President S C Ralhan said.
India’s cumulative merchandise exports were 17 per cent up year-on-year at $173.78 billion in April-July, while imports increased 19 per cent to $292.38 billion.
The merchandise trade deficit stood at $118.60 billion in the first four months of 2026-27 (FY27).
Economists expect the country’s current account deficit (CAD) to widen in July-September.
“While we expect a marginal CAD of about 0.2 per cent of gross domestic product (GDP) in Q1FY27, it is expected to widen sharply to about 2.0 per cent in Q2.
"Overall, we expect the CAD to print at a benign 0.9 per cent of GDP in FY27, which is likely to be comfortably financed, amid the RBI’s measures to attract capital flows, leading to an accretion to reserves in the fiscal,” ICRA Chief Economist Aditi Nayar said.
