India's goods trade deficit hits 6-month high as Mideast conflict lifts imports

[NEW DELHI] India’s merchandise trade deficit widened more than expected to a six-month high of US$31.98 billion in July, as the Middle East war drove up the country’s oil import bill and global freight rates.

The data underscores the growing pressure on India’s external balance, as a wider trade gap weighs on the rupee and capital inflows. The merchandise trade deficit in July was wider than the forecast of US$30.20 billion, according to a Reuters poll, and compared with a deficit of US$30.43 billion in the previous month.

Freight rates on routes from South Asia to the US and Europe have risen sharply in recent weeks, while rates to the Middle East remain elevated amid regional disruption, high fuel costs and tight vessel capacity, exporters said, and shipping-industry data showed. Goods exports hit a record high for July of US$44.24 billion, surpassing the previous July peak of US$38.34 billion in 2022, while it was US$40.41 billion in June. Imports rose to US$76.22 billion against US$70.84 billion in June, driven by a rise in crude oil prices, data showed.

Exports of petroleum products, electronics and engineering goods have recorded strong growth so far this fiscal year, while shipments to the Middle East rose 8.6 per cent year-on-year to US$5.7 billion in July, Rajesh Agrawal, trade secretary, told reporters. Iran and the United States remain at loggerheads over efforts to agree to an end to the war, according to a senior Iranian source, who said there had been no progress in talks to revive the interim deal agreed in June and define a time frame to implement it.

For July, India’s services exports remained robust at US$35.89 billion, while services imports totalled US$18.94 billion, resulting in a surplus of US$16.95 billion, trade ministry estimates showed.

India’s Trade Minister Piyush Goyal said on Wednesday that exports rose about 15 per cent in April-July, expressing confidence that the country can reach its US$1 trillion goods and services export target for the fiscal year ending March.

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The US remained the top destination for Indian exports, with goods shipments at US$33.49 billion in April-July, nearly matching last year’s level, data showed.

About 45 per cent of India’s exports to the US remain exempt from the new 10 per cent duty introduced by Washington in July, and India was actively engaging with US authorities to resolve outstanding trade issues, aiming for an early conclusion of a bilateral trade agreement, a trade official said. REUTERS