India’s May trade deficit rises to $28.21 billion on higher petroleum imports

In May 2026, India's trade gap expanded to $28.21 billion, largely influenced by a rise in petroleum imports. However, analysts forecast a potential easing due to declining crude oil costs and higher duties on gold imports. Notably, exports have experienced robust growth across various sectors and regions, showcasing the resilience of the country's external economy.

India’s merchandise trade deficit narrowed marginally to $28.21 billion in May, compared to $28.38 billion in April, as higher petroleum exports helped offset the impact of elevated energy imports amid geopolitical tensions in West Asia.Government data showed that merchandise exports rose to $45.2 billion in May from $43.56 billion in April, while imports also increased to $73.41 billion, up from $71.94 billion, which was a six-month high.A key driver of export growth was petroleum products, which surged 54.89% year-on-year to $8.42 billion in May, reflecting strong global demand and improved export momentum.In the services sector, India continued to perform strongly, with exports estimated at $36.76 billion against imports of $19.06 billion, resulting in a services trade surplus of $17.7 billion.The commerce ministry said the overall performance was supported by robust global demand for Indian goods and services. It added that India’s expanding role in international trade reflects sustained export resilience despite global uncertainties. Total exports, including merchandise and services, grew 14.66% year-on-year to $162.69 billion during April–May 2026–27.India’s external trade performance has been influenced by the ongoing West Asia conflict, which had disrupted global shipping routes, particularly through the Strait of Hormuz. The conflict had previously pushed global crude oil prices above $100 per barrel, at times touching $120, increasing inflationary pressures and straining India’s import bill.India Likely To Miss FY27 Fiscal Deficit Target Amid Rising Oil Costs The recent US-Iran agreement to end hostilities and reopen the Strait of Hormuz is expected to ease these pressures. India, which depends heavily on the region for nearly 50% of its crude oil imports, 70% of LPG, and 90% of LNG supplies, stands to benefit from stabilised energy flows.Exporters also anticipate a recovery in shipments to Gulf markets, where trade had fallen sharply during the conflict. In March, exports to the region dropped nearly 58% to $3.5 billion due to higher freight costs, insurance premiums, and logistical disruptions.The easing of tensions is expected to support India’s import costs, stabilise the rupee, and reduce inflation risks going forward.