Export weaknesses are becoming episodic; strengths are structural
India’s June trade deficit widened because of higher imports of crude oil, gold, fertilizers, and electronic goods, but merchandise and non-petroleum exports remained strong.
- India’s June trade deficit widened sharply, but the trade composition indicates that the pressure was driven mainly by imports rather than a collapse in exports.
- Merchandise exports rose sharply in June and in the first quarter.
- Non-petroleum exports grew robustly across most regions.
- Services exports continued to grow, but their pace slowed relative to merchandise exports.
India’s June trade deficit widened, but the trade data do not point to a broad deterioration in export capacity. The stronger import bill was driven mainly by crude oil, gold, fertilizers, and electronic goods, while merchandise exports rose sharply and non-petroleum exports remained robust.
What happened in June
India’s June trade deficit looks alarming at first glance, but the composition of imports and exports gives a more nuanced picture.
UPSC may use India’s trade deficit to test how crude oil prices, gold demand, fertilizer supply disruptions, and electronics imports affect the external sector, while also testing export diversification, non-petroleum exports, and the slower growth of services exports.
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