India's June merchandise exports lose steam as oil shipments weaken; trade deficit widens to $30.4 billion: Crisil

India's merchandise exports lost momentum in June as a sharp decline in petroleum shipments offset healthy growth in core sectors, while imports continued to surge, widening the country's goods trade deficit and reinforcing concerns over a higher current account deficit this fiscal, according to a Crisil report.

The report released on Friday noted that merchandise exports rose 15.5% year-on-year to $40.4 billion in June, slower than the 18% growth recorded in May.

The moderation was primarily due to petroleum exports, whose growth slowed sharply to 8.9% from 55.1% in the previous month as global crude oil prices corrected following an interim peace agreement between the United States and Iran. On a sequential basis, petroleum exports nearly halved to $4.9 billion in June from $8.4 billion in May.

Despite the drag from oil, non-oil exports remained resilient. Core exports, excluding oil and gems and jewellery, grew 15.3% compared with 12.3% in May, supported by strong shipments of engineering goods, electronic products, chemicals and pharmaceuticals.

Gems and jewellery exports also rebounded sharply, posting 34.6% growth after subdued performance in recent months. Agricultural exports remained robust, led by rice, meat, dairy, poultry and marine products.

Imports, however, outpaced exports, rising 31% year-on-year to $70.8 billion in June. The increase was driven by a sharp acceleration in core imports, particularly electronic goods, machinery, chemicals, transport equipment and coal. Fertiliser imports more than tripled from a year earlier as trade flows through the Strait of Hormuz improved. Although crude oil import growth moderated amid lower prices, higher volumes kept overall imports elevated.

As a result, India's merchandise trade deficit widened to $30.4 billion in June from $28.2 billion in May and $19.1 billion a year ago. Meanwhile, services exports grew 2.9%, but faster growth in services imports narrowed the services trade surplus to $15.1 billion from $16.2 billion a year earlier.

Crisil expects India's current account deficit to widen to 1.5% of GDP in FY27 from 0.6% in FY26, citing elevated crude oil and commodity prices as the principal driver of the goods trade gap.

It expects Brent crude to average $82-87 per barrel this fiscal, while warning that geopolitical developments in West Asia and persistent global trade disruptions remain key risks, though strong services exports are likely to provide partial support.