India’s trade deficit, widened to an eight-month high in June and it is expected to remain under pressure in the coming months as well. Several industry experts and economists believe that volatile oil prices and higher electronics component prices and chemicals imports could offset the impact of falling gold imports and this is seen as a key risk.
“Given oil prices are firming up, the overall trade deficit is also likely to remain high,” Nuvama noted.
India’s merchandise trade deficit widened to $30.4 billion in June, up by $2.2 billion from the previous month. Core trade deficit, which excludes oil and gold, rose by $3.3 billion to $15 billion in June.
Gold imports fall, but electronics deficit reaches record high
Gold imports in June declined 42% to $2 billion compared to May. This resulted in bringing the gold trade deficit down to $1.1 billion, the lowest level in three years. Nuvama believes government restrictions, including raising the import duty to 15% and capping duty-free imports for jewellery exporters at 100 kg per licence, curbed demand.
However, the improvement was offset by a deterioration in other segments. A sharp increase in electronics imports was the biggest contributor to the widening gap.
The electronics trade deficit rose by $1.3 billion to a record high of $8.4 billion. The chemicals trade deficit also widened by $1.2 billion during the month.
“Despite the healthy growth in engineering and electronic goods exports in 1QFY27, the higher imports of electronic goods and machinery have led to the core deficit widening further,” Emkay Research also said.
Here are the key numbers from the article that you can use as a fact box or highlights:
| Metric | June 2026 | Comparison |
|---|---|---|
| Goods trade deficit | $30.4 billion | vs $28.2 billion in May; 8-month high |
| Goods exports | $40.4 billion | ▼11% MoM, ▲16% YoY |
| Goods imports | $70.8 billion | ▼4% MoM, ▲31% YoY |
| Oil imports | $19.3 billion | ▼15% MoM |
| Oil exports | $4.9 billion | ▼42% MoM |
| Gold imports | $2 billion | ▼42% MoM |
| Silver imports | $0.1 billion | ▼20% MoM |
| Core exports | $33.1 billion | ▼3% MoM, ▲15% YoY |
| Core imports | $49.5 billion | ▲5% MoM, ▲30% YoY |
| Core trade deficit | $16.3 billion | vs $13 billion in May |
| Electronics exports | $4.9 billion | ▼3% MoM, ▲19% YoY |
| Electronics imports | $13.4 billion | ▲9% MoM, ▲59% YoY |
| Services surplus | $15.1 billion | ▼4% MoM, ▼7% YoY |
| Services exports | $33 billion | ▲3% YoY |
| Services imports | $17.9 billion | ▲13% YoY |
Export outlook remains uncertain
The wider trade deficit was mainly driven by weaker exports despite a moderation in imports, according to Emkay.
India’s goods exports grew 15.5% year-on-year (YoY) in June, but the pace slowed from 18% growth recorded in May.
Nuvamma believes “the export outlook remains uncertain amid renewed global supply chain disruptions, limiting any meaningful offset.”
Exports to China rose 28%, while shipments to the US remained largely flat. However, Emkay noted that “diversification efforts continued to bear fruit, with strong yoy growth in exports to Tanzania, jumped 146%, followed by South Africa at 77%, Malaysia at 74% and Vietnam at 49%.
AI headwinds may keep services exports under pressure
Net services surplus fell to $15.1 billion in June, down 4% from May and 7% from a year ago. Emkay believes this is because of AI-related headwinds and a further slowdown could increase pressure on India’s current account deficit.
“Net services exports growth has slowed sharply in recent months, in the face of AI headwinds, and further growth moderation would create upside risks for CAD/GDP,” Emkay noted.
Emkay cuts FY27 current account deficit forecast to 1.7%
Oil imports fell 15% from the previous month to $19.3 billion after crude oil prices dropped following the US-Iran memorandum of understanding (MoU). Oil exports also declined sharply by 42% to $4.9 billion.
“While oil prices have fallen following the US-Iran MoU, there is still a possibility of prices spiking again if the ongoing situation escalates. Nevertheless, prices are likely to stay lower for the rest of FY27; at $80/bbl average Brent for FY27,” Emkay noted.
Emkay lowered its FY27 current account deficit (CAD) forecast to 1.7% of GDP, assuming an average Brent crude price of $90 per barrel, citing expectations of lower oil imports.
The brokerage said that if Brent crude averages $80 per barrel during the financial year, India’s current account deficit could narrow further to 1.4% of GDP.
However, it cautioned that renewed geopolitical tensions could push crude oil prices back above $90 per barrel, posing risks to India’s external sector.
| Metric | Q1FY27 | Comparison |
|---|---|---|
| Goods exports | $129 billion | ▲ 16% YoY |
| Goods imports | $216 billion | ▲ 20% YoY |
| Goods trade deficit | $87 billion | vs $69 billion in Q1FY26 |
| Core exports | $99 billion | ▲ 13% YoY |
| Core imports | $144 billion | ▲ 17% YoY |
| Core trade deficit | $45 billion | vs $35 billion in Q1FY26 |
| Net services exports | $49 billion | ▲ 3% YoY |
| Gross services exports | $54 billion | ▲ 9% YoY |
Non-oil exports improved significantly, with growth rising to 12% from 3 per cent in the previous month.
Conclusion
The June trade data signifies that sharp decline in gold imports alone may not be enough to narrow India’s trade gap. With electronics imports surging to record levels, chemical imports remaining high, oil prices vulnerable to geopolitical shocks and services exports facing AI-related headwinds, the country’s external sector is expected to remain under pressure. The trajectory of crude oil prices and export demand will be key factors determining whether India’s trade deficit eases in the second half of FY27.