India's May Exports Dip, Trade Deficit Narrows

India's goods exports experienced a slight contraction in May, impacting overall trade figures and raising concerns about global demand. The latest data reveals a 2.17% year-on-year decrease in merchandise exports, totaling $38.73 billion.

However, a simultaneous drop in imports helped narrow the trade deficit, offering a mixed picture of India's trade performance. This news is crucial for businesses, policymakers, and investors tracking India's economic health and its position in global trade.

Highlights

• India's merchandise exports contracted by 2.17% in May, reaching $38.73 billion.
• The trade deficit narrowed to $21.88 billion due to a decrease in imports.
• Certain sectors, like electronic goods, pharmaceuticals, and marine products, showed positive export growth.

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Top 5 Key Insights

• Overall Export Decline: India's merchandise exports fell by 2.17% in May, reversing the positive trend seen in the previous two months. This decline is attributed to reduced exports in key sectors such as petroleum products, gems & jewellery, and engineering goods, signaling potential challenges in global demand and sector-specific issues.

• Narrowing Trade Deficit: The trade deficit narrowed to $21.88 billion in May, compared to $22.09 billion in May 2024, and $26.42 billion in April 2025. This reduction is primarily due to a decrease in imports, particularly in petroleum products, gold, and coal & coke, reflecting lower commodity prices and possibly reduced domestic demand.

• Sector-Specific Growth: Despite the overall export contraction, certain sectors demonstrated strong growth. Electronic goods exports increased by 54.10%, organic & inorganic chemicals by 16%, drugs & pharmaceuticals by 7.38%, marine products by 26.79%, and readymade garments by 11.35%, showcasing the resilience and competitiveness of these sectors.

• Services Sector Boost: The services sector continued to perform strongly, with exports rising to $32.39 billion in May 2025, compared to $29.61 billion in May 2024. This growth in services exports partially offset the decline in merchandise exports, contributing to a 2.77% increase in overall exports when combining both goods and services.

• Policy Impact and Outlook: The government's policy initiatives, including the Production Linked Incentive (PLI) scheme, are aimed at boosting manufacturing competitiveness and attracting foreign investment. While May's merchandise export data presents a mixed picture, the positive growth in specific sectors and the overall increase in combined exports suggest that these policies are having a positive, albeit uneven, impact.

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Expert Insights

Commerce Secretary Sunil Barthwal: "There was a sustained fall in prices in petroleum, which has got a dampening impact on the exports."

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Wrap Up

The contraction in India's merchandise exports in May highlights the challenges posed by global trade uncertainties and sector-specific issues. While the narrowing trade deficit offers some relief, sustained growth in exports is crucial for maintaining economic momentum.

The government's ongoing efforts to boost manufacturing and promote diversification in exports will play a vital role in navigating these challenges and ensuring long-term economic resilience.

Author

Liam O'Connell - A senior financial markets analyst based in London with over a decade covering global financial trends. He provides expert analysis on market movements and investment strategies for Enlightnr.