India's Trade Deficit Widens Sharply on Import Surge

India's goods exports saw a 15.5% increase year-on-year, reaching $40.41 billion in June. However, the trade deficit widened to a five-month high of $30.43 billion as imports grew at a faster rate. Merchandise imports rose by 31% to $70.8 billion, with crude oil imports alone jumping 40% to $19.32 billion.

Commerce secretary Rajesh Agrawal attributed the import surge primarily to elevated global prices for crude oil and precious metals, noting that this did not necessarily reflect increased import volumes. Petroleum, gold, and electronics imports collectively added $20 billion to the trade deficit. Higher demand from India's growing middle class was cited as a reason for increased electronics imports.

Exports to West Asia "evened out" in June, showing a 7.29% growth to $5 billion, after earlier disruptions due to the US-Iran conflict. India had utilized Omani ports to maintain shipments during that period. Top exports in the first quarter included engineering goods, petroleum products, and electronics, with the US and UAE as key destinations.

Factors contributing to export growth include free trade agreements and a diversification strategy. Merchandise exports for April-June reached $129.32 billion. Notably, growth drivers for India's exports are shifting from the US and Europe towards ASEAN, Africa, and South Asia.