India's Goods Trade Deficit Widens to $30.4 Billion in June on Surging Imports

India’s merchandise trade deficit widened to $30.4 billion in June, up from $28.2 billion in May, as a sharp acceleration in import growth outpaced a steady rise in exports. The expansion was primarily driven by a larger non-oil trade deficit, according to a note from Goldman Sachs.

A Widening Gap

The latest trade figures show a significant divergence between the growth rates of inbound and outbound goods. According to the analysis, key data points for June include:

• Merchandise Imports: Climbed 31.0% year-over-year, a significant acceleration from the 20.6% growth recorded in the previous month.
• Merchandise Exports: Saw a 15.5% year-over-year increase, moderating slightly from the 18.0% growth seen in May.

On a sequential, seasonally adjusted basis, overall goods exports fell by approximately 2% from May. This decline was led by weaker performance in petroleum products and engineering goods.

A Closer Look at Trade Flows

Ad

Beneath the headline numbers, non-oil and non-gold imports showed significant strength, rising about 7% month-over-month and 29% year-over-year. This was largely driven by a surge in electronics goods imports, which grew 9.4% from May and 59% from the same month last year.

The value of oil imports fell by about 1.4% month-over-month to $19.3 billion, influenced by lower crude oil prices. However, import volumes continued to rise, with media reports indicating that imports from Russia increased by approximately 30%. In contrast, gold imports dropped by around 20% month-over-month, a move attributed to the government's recent increase in import duties.

Services Surplus Narrows

The trade balance in services, which typically cushions the goods deficit, saw its surplus decline slightly in June. The services trade surplus fell to $15.1 billion from a revised $15.7 billion in May.

This was the result of services imports growing at a faster pace (+12.7% YoY) than services exports (+2.9% YoY). For investors, a widening merchandise trade deficit is a key metric for assessing a country's external financial position, as it can place downward pressure on the national currency.