Trade deficit hits six-month high despite record July exports

India’s merchandise trade deficit widened to $31.98 billion in July, its highest in six months, as a sharp rise in imports outweighed record exports for July.

Goods exports rose 19.6% from a year earlier to $44.24 billion, while imports increased 17.5% to $76.22 billion, according to data released by the commerce ministry on Thursday, 13 August.

The deficit widened from $30.43 billion in June and exceeded the $30.20 billion forecast in a Reuters poll of economists.

The export figure was the highest recorded for a July, surpassing the previous July peak of $38.34 billion in 2022, Reuters reported. Exports had stood at $40.41 billion in June.

Petroleum products, electronic goods and engineering goods were among the main drivers of the increase. Petroleum product exports jumped 67.6% from a year earlier to $6.92 billion, electronic goods exports rose 57.4% to $5.92 billion and engineering goods shipments increased 17.7% to $12.24 billion.

The export gains, however, were accompanied by a sharp rise in imports. Electronic goods imports surged 46% from a year earlier to $14.37 billion, while gold imports increased 4.8% to $4.16 billion. Imports of petroleum, crude and products rose 17.6% to $18.31 billion.

Oil imports eased from $19.33 billion in June but remained elevated amid higher global crude prices linked to the conflict in the Middle East. Overall merchandise imports climbed from $70.84 billion in June to $76.22 billion in July.

Commerce Secretary Rajesh Agrawal said exports to the Middle East rose 8.6% from a year earlier to $5.7 billion in July. The US remained India’s largest export destination, with goods shipments totaling $33.49 billion during April through July, Reuters reported.

The broader export picture also showed growth outside petroleum and gems and jewelry. Non-petroleum and non-gems and jewelry exports reached $35 billion in July, up from $30.47 billion a year earlier. Comparable imports rose to $51.82 billion from $43.07 billion.

For the first four months of the financial year, merchandise exports rose 17% to $173.78 billion, while imports increased 19.3% to $292.38 billion. The cumulative goods trade deficit widened to $118.60 billion from $96.66 billion in the same period a year earlier.

Services continued to offset part of the goods deficit. The government estimated July services exports at $35.89 billion and imports at $18.94 billion, producing a surplus of $16.95 billion. The July services figures are estimates because the latest data released by the Reserve Bank of India covers June.

Combining merchandise and services, India’s total exports were estimated at $80.14 billion in July, up 13.3% from a year earlier, while imports rose 15.8% to $95.16 billion. That left an overall trade deficit of $15.03 billion, compared with $11.43 billion a year earlier.

The widening goods deficit comes as exporters contend with higher freight costs, container shortages and shipping delays linked to disruption in the Middle East. Freight rates from South Asia to the United States and Europe have risen sharply in recent weeks, while rates to the Middle East remain elevated, Reuters reported.

The higher costs are squeezing margins for exporters in sectors including rice, textiles, pharmaceuticals and engineering goods, while delayed shipments, tight vessel capacity and uncertainty over shipping schedules are adding to operational pressures.