India’s trade deficit hits six-month high amid rising oil and electronics imports

India’s merchandise trade deficit widened to a six-month high in July driven by increased oil costs, surging electronics imports, and elevated freight charges, challenging the country’s external accounts despite record exports.

India’s merchandise trade deficit widened to a six-month high in July as rising oil costs, stronger electronics imports and higher freight charges strained the country’s external accounts. The trade ministry said the gap reached $31.98 billion, above economists’ expectations and wider than June’s $30.43 billion, even as exports climbed to a record July high of $44.24 billion.

Imports rose to $76.22 billion from $70.84 billion the previous month, with electronics purchases surging more than 44% from a year earlier to $14.37 billion and gold imports edging up to $4.16 billion. Oil imports were valued at $18.31 billion, down from June but still a major factor in the overall bill as crude prices and conflict-related shipping costs pushed up the cost of bringing goods into the country.

The latest figures mark a sharp shift from July 2023, when weaker global demand and lower commodity prices had pushed India’s merchandise deficit down to about $20.7 billion to $23.5 billion depending on the calculation used in separate reports. That earlier period was defined by falling exports and imports, whereas this year’s data points to firmer overseas demand and a heavier import burden, particularly in energy and technology-related goods.

Services continued to provide a sizeable buffer. The ministry estimated July services exports at $35.89 billion and services imports at $18.94 billion, leaving a surplus of $16.95 billion. But trade officials and exporters have warned that elevated freight rates, container shortages and delays on routes linked to the Middle East are squeezing margins across sectors including rice, textiles, pharmaceuticals and engineering goods, reinforcing the pressure from the wider goods trade gap.