India’s exports surge 9.1% in May, widening trade deficit

This expansion in imports led to a widening of the trade deficit to $23.78 billion, surpassing economists’ expectations of a $19.5 billion deficit as per a Reuters poll.

India’s merchandise exports saw a significant uptick in May, rising 9.1% year-on-year to $38.13 billion, according to government data. This growth was primarily driven by increased shipments of engineering goods, commercial vehicles, and smartphones, signalling a potential rebound in the country’s export sector.

The surge in exports comes as a positive sign for India’s economy, especially after a 3.1% contraction in merchandise exports to $437 billion in the previous fiscal year. Analysts are optimistic about the export outlook, citing a projected rebound in global trade, government incentives for manufacturing, and easing domestic inflation as key factors that could fuel further growth.

However, the rise in exports was accompanied by a 7.7% increase in merchandise imports, which reached $61.91 billion in May. This expansion in imports led to a widening of the trade deficit to $23.78 billion, surpassing economists’ expectations of a $19.5 billion deficit as per a Reuters poll. The trade deficit in April stood at $19.1 billion.

Trade Secretary Sunil Bharthwal, while releasing the figures, expressed optimism about the export trend. He noted that easing inflation in developed economies could potentially lead to better demand and a rise in imports from India. Bharthwal highlighted increased shipments to the United States as a contributing factor to the growth in goods exports.

The services sector also showed resilience, with exports estimated at $30.16 billion and imports at $17.28 billion in May. These figures represent a slight change from April’s services exports of $30.33 billion and imports of $16.63 billion.

This export growth aligns with India’s broader economic performance. The country’s economy grew at a faster-than-expected pace of 7.8% in the January-March quarter, bolstered by a strong showing in the manufacturing sector. Economists anticipate this momentum to continue throughout the year.

As global economic conditions evolve, all eyes will be on India’s ability to sustain this export growth and manage its trade balance. The government’s push for manufacturing through initiatives like ‘Make in India’ and efforts to diversify export markets could play crucial roles in shaping the country’s trade dynamics in the coming months.