The report attributes the sluggish development in merchandise exports largely to tepid demand from non-US markets. Whereas shipments to the US have held up as a result of front-loading of commerce, exports to different key geographies have failed to realize momentum.
In line with the commerce knowledge for June, India's items deficit narrowed to a 4-month low of USD 18.8 billion from USD 21.9 billion in Could This was pushed by a decrease non-oil non-gold deficit at USD 7.8 billion (USD 10.2 billion in Could), whereas oil deficit remained regular at USD 9.2 billion (USD 9.1 billion in Could). On a 12 months-on-12 months (YoY) foundation, the products deficit was decrease than the deficit of USD 20.8 billion seen in June 2024.
“To this point, India's items exports are greater to the US as a consequence of front-loading of commerce, however non-US exports have remained tepid. Thus, we see a weak development for India's items exports within the present fiscal yr, however imports might be greater as a result of relative energy of the home economic system. Thus, we see items deficit widening to USD 300bn in FY26 (USD 287bn in FY25),” the report added.
As per the information, exports to the US grew by 24 per cent YoY in June and 22 per cent YoY within the first quarter of Monetary 12 months 2026 (Q1FY26), however exports to different international locations had been decrease (-5.6 per cent YoY in June and -2.7 per cent YoY in Q1FY26), underscoring the affect of decrease oil exports in addition to weaker demand.
In the meantime, the nation's items exports noticed a gentle contraction of 0.1 per cent YoY at USD 35.1 billion in June, pushed by decrease oil exports (-16 per cent YoY), whereas non-oil exports had been higher positioned (2.9 per cent YoY).On a YoY foundation, electronics exports stay buoyant (+47 per cent YoY), adopted by chemical compounds (3.9 per cent YoY), plastic and rubber merchandise (2.3 per cent YoY), agri (1.6 per cent YoY), and engineering items exports (1.3 per cent YoY).The report additional acknowledged that India's comparatively sturdy home economic system is predicted to keep up strong import demand, notably for power, electronics, and capital items. This imbalance between sluggish export development and regular import demand is more likely to widen the commerce deficit additional within the present fiscal.
The report added that ongoing uncertainties surrounding US commerce and tariff insurance policies are more likely to have a deeper affect on international commerce flows in 2025, in contrast with what was seen throughout Commerce Conflict 1.0 (2018-19), as a result of scale of tariffs utilized to sectors and international locations.
The 90-day pause on Trump's reciprocal tariffs allowed some commerce flows to renew during the last three months, however the current bulletins of recent tariffs on 25 international locations have reignited the underlying considerations, that are more likely to affect demand if these tariffs are maintained.
Regardless of the uncertainties, India has been much less impacted up to now, with items exports mildly optimistic as a consequence of greater exports of electronics, chemical compounds, and engineering items.
“Larger tariffs on different regional friends additionally present a chance for India to broaden its market share within the US imports basket for chosen items,” the report acknowledged.
