NEW DELHI: India’s trade deficit eased to a five-month low of $26.86 billion in August from $27.22 billion a year ago and $32 billion recorded in July, data released by the Department of Commerce showed on Tuesday.
The trade deficit eased due to a sharp spike in goods exports, which rose at the fastest pace since June 2022. The value of outbound shipments jumped 26 per cent year-on-year (Y-o-Y) to $43.81 billion in the month, while imports rose 14 per cent Y-o-Y to $70.67 billion.
The commerce department estimated services exports at $38.87 billion in August, up nearly 25 per cent Y-o-Y, while services imports were estimated to have jumped 37 per cent to $21.42 billion. This resulted in an estimated services trade surplus of $17.45 billion. The Reserve Bank of India (RBI) is expected to release the final data on services trade later this month.
“This exceptional growth is being driven by dynamic group of commodities and key partner countries,” Commerce Secretary Rajesh Agrawal said while briefing journalists on the data. “We have seen good performances across engineering goods, petroleum products, chemicals, and textiles. At the same time, major demand has come from the US, EU, Brics nations, and emerging economies,” he added.
Engineering goods exports grew nearly 24 per cent Y-o-Y to $12.32 billion, while outward shipments of electronic goods nearly doubled to $5.55 billion in August from $2.93 billion a year ago.
Export of petroleum products increased 63 per cent to $6.81 billion. Organic & inorganic chemical exports surged a little over 16 per cent Y-o-Y to $2.80 billion.
Experts view sectoral performance as an encouraging sign as it suggests growth is not confined to a single export segment. “Engineering, electronics, chemicals, petroleum products, automobiles, and other value-added sectors are contributing to the expansion of India’s export basket,” said S C Ralhan, president of the Federation of Indian Export Organisations (FIEO).
“At the same time, the composition of imports underlines the need to further strengthen domestic manufacturing and value chains, particularly in critical industrial and technology-intensive inputs,” Ralhan added.
Meanwhile, Agrawal attributed the rise in imports to strong domestic economic expansion, increasing energy requirements, and critical inputs needed to sustain the rapid growth of India’s manufacturing sector.
India’s import of crude oil rose nearly 26 per cent Y-o-Y to $16.69 billion in August, while that of electronic goods jumped nearly 41 per cent to $13.66 billion.
Fertiliser imports grew nearly 14 per cent to $1.89 billion and coal, coke & briquettes shipment increased 25 per cent to 2.57 billion.
On the other hand, gold imports fell 58 per cent Y-o-Y to $2.30 billion in August. India’s gold shipments have eased after the government hiked Customs duty on the precious metal in May.
The US remained India’s top export market in August, with exports rising nearly 22 per cent Y-o-Y to $8.32 billion.
China continued to be India’s largest import source, with inward shipment increasing a little over 17 per cent Y-o-Y to $12.78 billion in August. Exports to China also jumped a little over 52 per cent to $1.84 billion.
Imports from Russia rose nearly 44 per cent to $6.96 billion in August, led by crude oil imports.
Cumulatively, goods exports were $215.91 billion in April-August, up nearly 18 per cent Y-o-Y. Imports were also 18 per cent higher Y-o-Y at $363 billion in the first five months of financial year 2026-27 (FY27). As such, the trade deficit stood at $147 billion in the five-month period.
Agrawal specified that the strong rise in exports was not just due to high prices, but rather showed India’s underlying manufacturing strength.
“India’s merchandise exports surge is not only a value-led growth, it is also a remarkable volume growth. We looked at granular data available up to July, it shows that segment volumes have also gone up,” the commerce secretary said.
“Out of the 168 principal commodities, 68 have seen both volume and value growth, and 107 have seen value growth,” he added.
The strong growth in goods exports has also increased their contribution to gross domestic product (GDP) after the share of exports recorded a consistent decline in the last three financial years. Exports accounted for 14 per cent of GDP in the first quarter (Q1) of FY27, according to the latest available data.
Following a slowdown in global demand in FY24 and FY25, and steep US tariffs on Indian goods in FY26, the share of exports in GDP fell to 11.3 per cent in FY26 from 11.7 per cent in FY25 and 12.5 per cent in FY24. At 14 per cent of GDP in Q1FY27, the share of exports has recovered to the level seen in FY23 — a year when annual goods exports were at a record high.
Source: Business Standard
