India’s merchandise exports climbed 18% in May, led by outbound shipments of engineering goods, petroleum products and electronics goods.
Merchandise exports were estimated at $45.20 billion last month, up from $38.30 billion a year earlier, according to provisional data released by the ministry of commerce and industry on Monday.
Imports climbed 20.6% to $73.41 billion from $60.86 billion. The trade deficit widened to $28.21 billion from $22.56 billion in May last year.
Services exports rose to $36.76 billion in May from $32.46 billion a year earlier, while services imports rose to $19.06 billion from $16.70 billion.
The overall trade deficit, including services, widened to $10.51 billion in May from $6.79 billion a year ago. Total exports, including merchandise and services, rose to $81.96 billion from $70.76 billion, while total imports increased to $92.47 billion from $77.55 billion.
The provisional data was released by the ministry just after the US and Iran agreed to a peace deal that would ease tensions around the Strait of Hormuz, a key route for energy shipments and global trade. The deal is expected to improve India’s trade and energy outlook, with exporters and industry groups expecting lower freight costs, steadier supply chains and reduced volatility in Gulf-linked markets.
The US-Iran war had led to a blockade of the Strait of Hormuz, curbing the flow of goods to ports in the Persian Gulf and prompting exporters to opt for alternative trade routes, often at higher costs. India’s exporters, particularly smaller businesses that account for 48% of the country’s exports, have faced rising freight costs and cargo delays across the Gulf region.
The Reserve Bank of India noted on 5 June that the global economy has been shaped by heightened uncertainty, disruptions to key trade routes and supply chains, increased market volatility, and cautious business sentiment over the past few months.
Upside risks
The surge in energy prices and persistent trade policy uncertainties continue to pose upside risks to India’s current account deficit in FY27, while a services trade surplus and inward remittances are expected to provide some comfort, the RBI said.
It said merchandise exports recorded strong growth in April, notwithstanding elevated freight and insurance costs. Services exports also held up well, reflecting sustained demand despite concerns about AI.
Merchandise exports had risen to $43.56 billion in April from $38.28 billion a year earlier.
Imports climbed 10% to $71.94 billion in April from $65.38 billion. The trade deficit widened to $28.38 billion in April from $27.1 billion a year ago.
India has set a target of more than doubling total exports to $2 trillion by FY31 – $1 trillion each in merchandise shipments and services. The government has asked officials to sharpen focus on micro, small and medium enterprises, farm products, certification and promotion of ‘Brand India.’
The central bank said weak global demand and high logistics costs are headwinds for merchandise exports. Services exports, though, are expected to sustain their momentum as demand for Indian services remains healthy.
Measures by the government, including support to small businesses and export sectors, efforts to ramp up domestic gas and crude production, encouraging use of domestically produced alternatives to imported inputs and diversification of critical imports, should help cope up with the external shocks, the RBI said.