India’s Trade Deficit Narrows Sharply to $21.88 Billion in May

India’s merchandise trade deficit narrowed to $21.88 billion in May, significantly below economists’ expectations of $25 billion and April’s deficit of $26.42 billion, according to data released by the government on Monday.

The improvement came as imports declined while exports saw a slight increase. Goods exports rose to $38.73 billion in May, compared to $38.49 billion in April. Meanwhile, imports dropped to $60.61 billion, down from $64.91 billion the previous month. This helped ease the overall trade gap and reflects a positive development for Asia’s third-largest economy, which has been grappling with global trade uncertainties and commodity price fluctuations.

In the services sector, India recorded an estimated trade surplus of $14.65 billion in May. Services exports were projected at $32.39 billion, while imports were estimated at $17.14 billion, according to Trade Secretary Sunil Barthwal. The growing surplus in services trade continues to play a critical role in balancing India’s overall current account.

The narrowing trade deficit could ease pressure on the Indian rupee and support the Reserve Bank of India’s monetary policy stance, as policymakers closely monitor external imbalances amid shifting global economic conditions.

Lower import bills, potentially driven by softer crude oil prices and moderated non-essential imports, contributed to the reduced trade gap, while stable export performance underscores resilience in sectors such as engineering goods, pharmaceuticals, and electronics.

As global trade dynamics remain uncertain, India’s trade outlook will depend on external demand, supply chain stability, and commodity price movements. However, May’s data indicates improving trade fundamentals and provides a boost to the country’s external sector performance.