BIZ DESK
India’s overall trade deficit — which combines both merchandise and services — widened in July 2025 to USD 11.72 billion, marking a significant jump from USD 10.10 billion in July 2024, according to fresh data from the Ministry of Commerce & Industry. The expansion in the deficit was primarily driven by imports growing at a faster pace than exports, despite healthy gains in outbound shipments.
Exports Show Growth but Imports Surge Faster
Merchandise and services exports together rose to USD 68.25 billion in July 2025, up from USD 65.31 billion a year earlier. However, imports climbed more sharply to USD 79.99 billion, compared with USD 75.41 billion in July 2024. This mismatch widened the trade gap at a time when the global trade environment remains uncertain.
The increase comes against the backdrop of rising geopolitical frictions and the 50% reciprocal tariffs recently announced by U.S. President Donald Trump — a policy move that could reshape bilateral trade flows for many economies, including India.
Sector-Wise Export Boost
Commenting on the trade performance, Commerce Secretary Sunil Barthwal highlighted that India’s exports, both in July and across the April–July period of FY 2025-26, have grown faster than the global average despite policy headwinds.
“Major contributors to July’s merchandise export growth,” Barthwal noted, “include engineering goods, electronic goods, gems and jewellery, pharmaceuticals, and organic and inorganic chemicals.” These sectors have remained resilient, driven by strong global demand and government-led policy support.
Trend Reversal from Earlier Months
The July figures stand in contrast to the positive narrowing trend seen earlier this year. In June 2025, the trade deficit fell to USD 3.51 billion, down from USD 7.30 billion in June 2024, as exports outpaced imports. Similarly, in May 2025, the gap shrank to USD 6.62 billion from USD 9.35 billion the year before, supported by a rise in exports to USD 71.12 billion.
Government Policy Support Driving Exports
Policy measures such as the Production Linked Incentive (PLI) scheme across 14 sectors — including electronics, telecom equipment, and electric vehicle batteries — have bolstered manufacturing competitiveness, drawn fresh investments, and helped trim import dependency in critical areas.
India has also been actively pursuing Free Trade Agreements (FTAs) to expand market access. Recent deals with the United Kingdom and the United Arab Emirates, along with ongoing negotiations with other major economies, are expected to further fuel export momentum.
Ambitious Targets Amid Challenges
The government has set a USD 1 trillion export target for FY 2025-26. However, the July data underscores the challenge: even with strong export performance, India’s appetite for imports — from energy and electronics to high-value machinery — remains robust.
Analysts say the widening gap will need close monitoring, particularly if global demand slows in the coming months or if new tariff barriers disrupt existing trade routes.