India's Merchandise Exports Grow, Trade Deficit Remains Monitorable: CRISIL
The report found that India's fiscal health indicates a modest uptick in non-oil sector merchandise exports, but imports still outpace exports.
A CRISIL report on India's fiscal health notes a positive outlook on merchandise exports which have shown a modest uptick and sustained momentum in non-oil sectors. However, the trajectory of imports has outpaced exports, leading to a widening trade deficit, a critical area of concern.
The trade deficit will remain a key monitorable, the report said. Largely because the US's tariff hikes on Chinese imports could potentially lead to some dumping by China into the larger Asian market.
Despite these challenges, expectations of domestic growth moderation are anticipated to mitigate import escalation and stabilise the trade deficit. Additionally, a surplus in services trade and robust remittances flow suggests the current account is expected to remain in a safe zone.
The report found that In June, India's merchandise exports grew by 2.6% year-on-year, with non-oil exports maintaining momentum at 7.7%. Merchandise imports increased by 5%, with core imports growing stronger at 7.1%.
A higher growth in imports compared to exports saw merchandise trade deficit widen to $21 billion from $19.2 billion in June last year.
Cumulatively for the June quarter of fiscal 2025, merchandise exports rose 5.8% to $109.96 billion, while imports grew faster at 7.7% to $172.4 billion, resulting in a widened trade deficit of $62.44 billion.
It is also noteworthy that the trade deficit widened due to a higher oil trade deficit, while the non-oil trade deficit narrowed compared with last year.
Services exports increased by 10.2% year-on-year to $29.76 billion in May, with a services trade surplus of $13.02 billion.
Data Highlights
Petroleum exports in June decreased 18.3% YoY and 18.5% YoY, despite stable Brent spot prices, suggesting a reduction in export volumes. Export volumes fell to $5.5 billion from $6.8 billion in June last year and $6.8 billion in the previous month.
Oil exports decreased, but imports grew to meet domestic demand as local refineries exceeded capacity, with imports rising 19.6% in June compared to 28% in May.
Core export goods such as drugs and pharmaceuticals, engineering goods, organic and inorganic chemicals, and readymade garments showed positive growth.
Gems and jewellery exports remained in the red at -1.4% on-year, compared to a contraction of 2.2% on-year last month. This is the seventh consecutive month of negative growth since December 2023.
Labour-intensive category exports saw positive growth in carpets, handloom products, manmade products, plastic and linoleum, and readymade garments, while handmade carpets, jute manufacturing, and leather products showed a contraction.
Although India has more than 15% of the world's exports share in cashew, exports saw growth softening in June at -7.3% versus -25.8%. Categories like coffee, fruits and vegetables, and rice showed healthy but slower growth when compared to the previous month.
Marine products, meat, dairy, and poultry products saw exports shrink.
Imports of electronic goods, fruits and vegetables, non-ferrous metals, project goods, textiles, yarn fabric made-up articles, and wood and wood products showed notable growth compared to the previous month.
