India’s goods trade deficit widens on Hormuz disruptions, weak exports
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[NEW DELHI] India’s merchandise trade deficit widened to US$30.43 billion in June as exports fell faster than imports, weighed down by shipping disruptions in the Strait of Hormuz linked to the Middle East conflict.
Exporters’ bodies have flagged concerns over global demand softness, particularly from Western markets, as a drag on growth in outbound shipments.
The number of vessels transiting the Strait of Hormuz fell to multi-week lows on Sunday as renewed strikes between the US and Iran and attacks on ships heightened safety concerns. The violence casts doubt on the future of an interim US-Iranian agreement signed last month.
Economists had expected India’s trade deficit to widen to US$26.63 billion in June, according to a Reuters poll, compared with a deficit of US$28.21 billion in May.
India’s merchandise exports fell to US$40.41 billion in June from US$45.2 billion in the previous month while imports declined to US$70.84 billion from US$73.41 billion in May, data released on Monday (Jul 13) showed.
Aditi Nayar, chief economist at ICRA, said the merchandise trade deficit widened by over 50 per cent from a year earlier as elevated commodity prices pushed up the import bill.
“With West Asia’s impact on crude prices remaining a monitorable, ICRA expects the current account deficit to widen to at least 1.0 per cent of GDP in FY2027,” she said.
The data underscores pressure on India to sustain exports and curb imports as it talks with the United States on an interim trade deal, with Prime Minister Narendra Modi drawing confidence from trade agreements with Britain and the EU, and recent electoral gains at home.
Modi and his New Zealand counterpart Christopher Luxon upgraded their nations’ diplomatic ties last week, in a bid to bolster linkages in the Asia-Pacific region.
For June, India’s services exports remained robust at US$33.03 billion, while services imports totalled US$17.92 billion, resulting in a surplus of US$15.11 billion, trade ministry estimates showed.
India’s bilateral talks with the US are progressing “well”, India’s trade secretary, Rajesh Agrawal, told reporters, adding a framework deal is ready and will be signed “whenever it is the right time”.
In April-June, India’s overall goods and services exports rose more than 11 per cent year-on-year to US$232.73 billion, despite disruptions from the Iran war, buoyed by a pick up in jewellery and engineering goods, among others, a trade ministry statement said.
The US remained the top destination for Indian exports, with goods shipments at US$25.48 billion during April-June, nearly matching last year’s level, data showed.
In June, goods exports to the U.S. were marginally lower at US$8.12 billion, compared with US$8.27 billion a year earlier.
India’s oil imports, a key swing factor, stood at US$19.33 billion in June against $22.68 billion in May, reflecting movement in global crude prices, while gold imports declined to US$1.97 billion from US$3.42 billion in the previous month.
India’s overall trade deficit is pegged at US$15.32 billion in June, compared with US$10.51 billion in May. REUTERS
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