India's trade deficit narrows to $21.88 bn in May; merchandise exports decline

India's merchandise trade deficit stood at $21.88 billion in May 2025, down from $26.42 billion in the previous month and $22.09 billion in the year-ago period, as the country pursues free trade agreements with various countries, the government data released on Monday showed. The merchandise exports fell to $38.73 billion in May 2025, down from $39.59 billion in the year-ago period. The imports declined to $60.61 billion in the said month from $61.68 billion a year ago.

Services exports increased to $32.39 billion in May, up from $29.61 billion in the year-ago period. Services imports at $17.14 billion were up from $16.88 billion in the year-ago period. The overall exports rose to $71.12 billion in the said month, up 2.77% from $69.20 billion in the year-ago period, while imports fell to $77.75 billion from $78.55 billion in the year-ago period, a decline of 1.02%.

The overall trade deficit, comprising both merchandise and services, stood at $6.62 billion, an improvement from $9.35 billion in the year-ago period. India’s cumulative exports (merchandise and services) in April–May 2025 stood at $142.43 billion, up from $134.69 billion in the same period last year, reflecting a growth of 5.75%.

Merchandise exports for April-May 2025 were valued at $77.19 billion, compared to $74.89 billion in April-May 2024, marking a 3.07% increase. Non-petroleum exports during April-May 2025 rose to $64.25 billion, up 7.53% from $59.75 billion in the previous year.

The recent tariff war imposed by the US and its subsequent impact on the countries, including India, have affected global trade. Now, with the Iran-Israel war reaching a dangerous level, it's believed that global oil and goods imports could be affected. The country could soon face disruptions in oil and goods imports due to escalating tensions between Israel and Iran, warns a new report by the Global Trade Research Initiative (GTRI).

As the conflict intensifies, key maritime trade routes, particularly the strategic Strait of Hormuz, risk being blocked. This narrow waterway is critical for transporting oil and gas to India. Any escalation could drive up fuel prices, delay shipments, and stoke inflation.