India’s macro signals are beginning to diverge. Official trade data shows domestic demand remained resilient through FY26, even as a Bank of Baroda (BoB) note on the monsoon warns that a below-normal rainfall season could weigh on rural incomes and consumption in the months ahead.

Trade data shows demand still holding up

According to the latest government data, India’s merchandise trade deficit widened to $333.2 billion in FY26, up from $283.5 billion a year ago, as imports rose sharply to $775 billion while exports grew marginally to $441.7 billion.

The overall trade deficit, including services, stood at $119.3 billion, even as the services surplus improved to $213.9 billion.

BoB: Import surge reflects strong domestic demand

In its analysis of the FY26 trade data, Bank of Baroda said that the widening deficit was driven more by strong imports than by any sharp deterioration in exports.

The report notes gold imports rose 25%, driven by strong demand. Electronic goods imports grew 17.9%, machinery imports increased 15.8%, non-oil and non-gold imports rose 10.9%.

Taken together, BoB says this points to resilient domestic demand, despite global uncertainties.

Monsoon forecast raises early warning signals

However, a separate BoB note flags risks emerging from the agriculture side.

The IMD’s first forecast pegs monsoon rainfall at 92% of the long period average, indicating a below-normal monsoon for the upcoming season. While preliminary, this is important because rainfall below 96% is classified as sub-normal.

The report stresses that India’s economy remains structurally dependent on the monsoon:

• Only 50–60% of farmland is irrigated

Historical data cited in the report shows that sub-normal monsoon years are associated with weaker agricultural growth, particularly in the kharif season.

Why the two trends matter together

Trade data reflects current demand strength, while monsoon outlook indicates potential future risk.

If rainfall turns out weaker than normal, it could impact farm incomes, weigh on rural consumption and affect sectors dependent on discretionary spending.

At a time when domestic demand is driving import growth, this becomes a key variable to watch.

The report has however cautioned against over-interpreting the IMD’s first forecast. It says that the correlation between initial forecasts and actual rainfall is low, at around 0.19, indicating that early projections are not always reliable indicators of final outcomes. Forecast accuracy, however, has improved in recent years.