Exports, imports skid, trade deficit narrows a bit in May

India’s merchandise exports declined 2.2% on-year to $38.7 billion in May amid tariff uncertainty, following a strong 9% growth in the previous month. Oil, and gems and jewellery exports fell sharply, pulling down exports in May, while core exports (non-oil and non-gold1) continued to rise.

Oil exports shrank 30.4% on-year in May (vs growth of 4.8% in April). Gems and jewellery exports contracted 13.9% on-year (vs growth of 10.7% in April) despite a rise in gold prices (40.8% on-year in May vs 38% in April) which may indicate some softening in discretionary demand abroad.

Brent crude oil prices declined 5.2% on-month and 21.7% on-year in May to $64.2 per barrel on average, which possibly played a role in the sharp decline in oil exports.

Core exports grew 6.9% on-year, albeit softer than the 10% logged in the previous month.

Merchandise imports fell 1.7% on-year to $60.6 billion, after notching up a 32-month-high growth of 19.1% in April. A slide in oil imports (-26.2% vs 25.6%), and gems and jewellery imports (-4.9% vs 4.1%) were the primary reasons. On the other hand, core imports continued to rise on-year, but at a slower pace (12% vs 18.1%).

Consequently, merchandise trade deficit narrowed on-month to $21.9 billion in May (vs $26.4 billion in April) and on-year from $22.1 billion in May 2024.

Meanwhile on the services front, while exports continued to rise, the pace of growth moderated to an extent. India’s services exports grew 8.8% in April, an eight-month low, to $32.8 billion. Imports grew by a softer 1% (to $16.9 billion) compared with 5.3% in March. Net-net the services trade surplus widened on-year to $15.9 billion from $13.4 billion in April 2024, but was lower on-month ($18.1 billion).