Has India's merchandise trade deficit fallen to $21.88 billion in May?
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Synopsis
India's merchandise trade deficit has shown significant improvement, dropping to $21.88 billion in May 2025. This is a positive sign for the economy as it reflects a stronger external sector amidst global trade uncertainties. Notably, electronic goods exports surged by 54%, showcasing resilience despite geopolitical tensions.
Key Takeaways
- India's trade deficit decreased to $21.88 billion in May.
- Exports of electronic goods rose by 54%.
- Imports fell by 1.7% year-on-year.
- Foreign exchange reserves reached $696.66 billion.
- Geopolitical tensions impact trade dynamics.
New Delhi, June 16 (NationPress) India's merchandise trade deficit has decreased to $21.88 billion in May 2025, down from $26.42 billion in April, indicating a resilient external sector, as per data released on Monday.
The trade deficit also showed improvement year-on-year, compared to $22.09 billion recorded in May 2024.
Commerce Secretary Sunil Barthwal remarked, “Despite the global policy uncertainties surrounding trade, our performance has been commendable.”
He highlighted that exports of electronic goods, particularly mobile phones, saw a remarkable year-on-year increase of 54 percent in May.
In addition, exports of chemicals rose by 16 percent, while the pharmaceuticals sector grew by 7.38 percent, he noted.
Merchandise exports in May 2025 were slightly down by 2.17 percent, amounting to $38.73 billion, compared to $39.59 billion in May 2024, amid escalating geopolitical tensions. Conversely, imports decreased by 1.7 percent year-on-year to $60.61 billion during the month, down from $61.68 billion in May 2024.
Simultaneously, the services sector reported a surplus estimated at $14.65 billion in May, with services exports rising to an estimated $32.39 billion while imports increased to $17.14 billion, according to the Commerce Secretary.
The data also indicated that for the April-May period of the first quarter of the current financial year, exports reached $77.19 billion, while imports were $125.52 billion.
The reduction in the trade deficit is expected to bolster the rupee against the US dollar and comes at a time when the country’s foreign exchange reserves are approaching an all-time high.
India's foreign exchange reserves surged by $5.17 billion to $696.66 billion for the week ending June 6, as reported by the RBI on Friday.
This significant increase brings the nation's forex reserves close to the historic high of $704.885 billion, achieved at the end of September 2024.
As of the week ending June 6, foreign currency assets, a crucial component of reserves, rose by $3.47 billion to $587.69 billion.
The gold component of forex reserves grew by $1.6 million to $85.89 billion during the week. Central banks globally are increasingly adding gold as a safe-haven asset within their foreign exchange reserves amid geopolitical uncertainties. The current gold reserves stand at $83.582 billion, with the share of gold held by the Reserve Bank of India (RBI) nearly doubling since 2021.
An increase in foreign exchange reserves signifies robust economic fundamentals and provides the RBI with greater flexibility to stabilize the rupee during volatile periods.
A strong forex reserve enables the RBI to intervene in both spot and forward currency markets by releasing more dollars, thereby preventing the rupee from experiencing a drastic decline.
Point of View
It is evident that India's trade performance is a testament to its economic resilience. The narrowing trade deficit, paired with a rise in foreign exchange reserves, paints a promising picture of the nation's economic health. While geopolitical tensions pose challenges, India's ability to adapt and thrive in such an environment reflects its strong fundamentals. We stand firmly with our nation as it navigates these complexities.
NationPress
16/06/2025
Frequently Asked Questions
What is the current trade deficit of India?
India's merchandise trade deficit has declined to $21.88 billion in May 2025.
How much did India's trade deficit decrease from April to May?
The trade deficit decreased from $26.42 billion in April to $21.88 billion in May.
What sectors saw an increase in exports?
Exports of electronic goods surged by 54%, while chemicals and pharmaceuticals also saw growth.
What impact does the trade deficit have on the rupee?
A narrowing trade deficit can help strengthen the rupee against the US dollar.
How are India's foreign exchange reserves performing?
India's foreign exchange reserves surged by $5.17 billion to $696.66 billion as of June 6, 2025.
