India's merchandise trade deficit widens to $23.78 billion in May

India released data for May trade figures on June 14

India's trade deficit widened to $23.78 billion in May 2024 as against $19.1 billion in the first month of 2024-25, the commerce ministry said on June 14.

While exports rose nearly 9 percent from April to $38.13 billion in May, imports shot up 14.45 percent to $61.91 billion.

On a year-on-year basis, exports grew over 9 percent and imports registered a growth of 7.8 percent.

One of the leading causes for the higher trade deficit is a rise in oil imports of 28.1 percent to $19.95 billion in May 2024 on a year-on-year basis.

In sequential terms, 71 percent of the enlargement in the merchandise trade deficit in May 2024 relative to April 2024 was driven by the net oil balance, with a sharp rise in volumes amidst some cooling in prices, according to ICRA's Aditi Nayar.

"Things are looking optimistic for the trade sector," Commerce Secretary Sunil Barthwal said, adding that the rise in exports in May was driven by growth in outbound shipments of pharmaceutical products, engineering goods, among others.

Inflation has eased in developed economies, potentially leading to better demand and a rise in imports from India, Barthwal added.

The major drivers of merchandise export growth in May 2024 include petroleum Products (15.75 percent on-year), Engineering Goods (7.39 percent), and Electronic Goods (22.97 percent).

EEPC India Chairman Arun Kumar Garodia said in line with expectations, the upturn in shipments of engineering goods reflects improvement in demand scenario in India's key markets. The global economic outlook is expected to improve in the ongoing fiscal and the exporting community remains optimistic, he added.

India’s overall exports (merchandise and services combined) for May 2024 are estimated at $68.29 billion, a growth of 10.25 percent vis-à-vis the same month last year. Overall imports are seen at $79.20 billion, rising 7.95 percent in the same period.

While the estimated value of services export for May 2024 is $30.16 billion as compared to $26.99 billion in May 2023, services imports are seen at $17.28 billion versus $15.88 billion in the same month last year.