India's merchandise exports climbed 15.5 per cent year-on-year to $40.41 billion in June 2025, up from $34.98 billion in the same month last year, according to data released by the Commerce Ministry on Monday, 13 July. The growth, however, was overshadowed by a sharper surge in imports that pushed the merchandise trade deficit to a steep $30.43 billion.

Import Surge Widens Trade Deficit

Imports rose at a considerably faster pace of 31 per cent to $70.84 billion in June, compared with $54.08 billion a year earlier. The widening gap drove the merchandise trade deficit up nearly 59 per cent from $19.10 billion in June 2024. The primary culprits, according to officials, were elevated global prices of crude oil and precious metals, particularly in the petroleum and gems and jewellery segments. Electronics imports also expanded, driven by rising disposable incomes and robust demand from India's growing middle class.

Sequential Dip in Exports and Imports

On a month-on-month basis, merchandise exports declined to $40.41 billion in June from $45.20 billion in May, while imports eased slightly to $70.84 billion from $73.41 billion the previous month. The sequential softening in both directions suggests some normalisation after a particularly strong May, though the structural import pressure from energy and metals remains in place.

Strong Q1 Performance Despite Global Headwinds

For the April–June 2025 quarter, India's overall goods exports rose approximately 15.9 per cent to $129.32 billion compared with the same period last year, officials said. The performance is notable given continued uncertainties in global trade markets. Exports to Gulf countries have recovered to pre-war levels, climbing to $5.3 billion in May from $2.62 billion in March, as traders adapted to alternative shipping routes. Exports to the United States edged up to $17.29 billion during April and May.

Market Diversification and New Trade Pacts

Commerce Secretary Rajesh Agrawal noted that regions outside NAFTA and Europe now account for more than half of India's merchandise exports, reflecting a sustained diversification of export markets. India is also broadening access to developed economies: a UK free trade agreement is set to take effect this month, while an EU trade agreement is expected by early next year. These developments signal a structural shift in India's export strategy beyond its traditional Western-market dependency.

What to Watch

The trajectory of global crude oil and precious metal prices will be critical in determining whether the trade deficit narrows in the coming months. Any easing in commodity prices could compress the import bill and improve the deficit position. Simultaneously, the activation of the UK FTA and progress on the EU deal will be closely watched as potential catalysts for export growth in the second half of the fiscal year.