India’s merchandise trade deficit widened to a six-month high of $31.98 billion in July 2026, as a sharp increase in imports outweighed record growth in goods exports. Merchandise imports rose 17.5% year-on-year to $76.22 billion, while exports increased 19.6% to a record $44.24 billion.
The wider trade gap came despite strong export performance, with petroleum products, electronics, engineering goods and marine products supporting outbound shipments. Higher crude oil, electronics, gold, fertilizer and coal imports, however, pushed the overall import bill higher. The July deficit was above the $30.43 billion recorded in June and the $27.88 billion deficit in July 2025.
Merchandise Trade Deficit Reaches Six-Month High
India’s July merchandise trade deficit increased as imports grew faster in absolute terms than exports. The $31.98 billion gap means the country imported substantially more goods than it exported during the month.
Economists surveyed by Reuters had expected a merchandise trade deficit of around $30.20 billion, meaning the actual figure was wider than anticipated.
India’s Merchandise Trade In July 2026
| Indicator | July 2026 | July 2025 | Year-on-Year Change |
|---|---|---|---|
| Merchandise exports | $44.24 billion | $36.98 billion | +19.63% |
| Merchandise imports | $76.22 billion | $64.86 billion | +17.52% |
| Trade deficit | $31.98 billion | $27.88 billion | Higher |
| June 2026 deficit | $30.43 billion | — | — |
The July export figure was the highest ever recorded for the month, surpassing the previous July peak of $38.34 billion recorded in 2022.
Exports Jump Nearly 20%
India’s merchandise exports increased 19.63% year-on-year to $44.24 billion in July. The growth was the strongest since June 2022, when merchandise exports had risen 30.12%.
Petroleum products were among the major contributors to the increase, while electronics, engineering goods and marine products also recorded strong export growth.
Exports to West Asia also recovered, rising 8.6% year-on-year to around $5.7 billion in July. Commerce Secretary Rajesh Agrawal attributed the broader export performance to strong shipments across several product categories.
Major Export Drivers
| Export Category | July Performance |
|---|---|
| Total merchandise exports | $44.24 billion |
| Petroleum products | $6.92 billion |
| Electronics | Strong growth |
| Engineering goods | Strong growth |
| Marine products | Strong growth |
| Exports to West Asia | $5.7 billion |
Petroleum products exports rose 67.64% to $6.92 billion, while electronic goods exports increased 57.40%, according to data cited in domestic reports.
Imports Rise 17.5%
Imports climbed 17.52% year-on-year to $76.22 billion in July, reaching their highest level in nine months. The increase was driven by higher shipments of crude oil, electronics, gold, fertilizer and coal.
Crude oil remained one of India’s largest import categories. Oil imports increased nearly 18% year-on-year to $18.31 billion, with global crude prices ranging between roughly $72 and $95 per barrel during July.
Key Import Categories In July
| Import Category | July 2026 Value | YoY Change |
|---|---|---|
| Crude oil | $18.31 billion | +17.64% |
| Electronics | $14.37 billion | More than +44% |
| Gold | $4.16 billion | +4.77% |
| Coal | $3.05 billion | +29% |
| Fertilizers | $2.48 billion | More than +55% |
| Chemicals | $1.22 billion | Nearly +22% |
| Total merchandise imports | $76.22 billion | +17.52% |
Electronics imports were particularly notable, climbing more than 44% year-on-year to $14.37 billion. Gold imports increased nearly 5% to $4.16 billion.
Electronics Imports Surge As Domestic Demand Grows
The sharp increase in electronics imports highlights one of the more important trends within India’s trade data.
Electronics imports, including chips, rose to $14.37 billion in July. The increase came even as India has been rapidly expanding domestic electronics manufacturing and exports.
This reflects the complexity of India’s electronics supply chain. Domestic production has increased, but manufacturers continue to import a significant amount of components and finished or intermediate electronic products.
Electronics Trade Trend
| Indicator | July 2026 |
|---|---|
| Electronics imports | $14.37 billion |
| YoY growth | More than 44% |
| Position among major import drivers | One of the largest |
| Key implication | Rising electronics demand and component imports |
The rise in electronics imports could therefore represent both a challenge for India’s trade balance and evidence of expanding demand within one of the country’s fastest-growing technology sectors.
Crude Oil Remains A Major Pressure Point
Oil continues to have an outsized influence on India’s trade balance because the country imports a large proportion of the crude oil it consumes.
In July, crude oil imports were worth $18.31 billion, accounting for roughly 24% of total merchandise imports.
Higher global oil prices can therefore quickly widen India’s merchandise deficit even when exports are performing strongly.
The Middle East conflict and resulting disruptions to shipping and freight markets also added uncertainty to India’s external trade environment. Reuters reported that the conflict contributed to higher oil costs and global freight rates.
April-July Trade Deficit Also Widens
The pressure is not limited to July.
During the first four months of FY2026-27, India’s merchandise exports increased 17.04% to $173.78 billion, while imports rose faster, increasing 19.27% to $292.38 billion.
That resulted in a cumulative merchandise trade deficit of approximately $118.60 billion, compared with $96.66 billion during the corresponding period of the previous fiscal year.
April-July 2026 Trade Performance
| Indicator | April-July 2026 | YoY Growth |
|---|---|---|
| Merchandise exports | $173.78 billion | +17.04% |
| Merchandise imports | $292.38 billion | +19.27% |
| Merchandise trade deficit | $118.60 billion | Higher |
| Previous-year deficit | $96.66 billion | — |
The faster growth in imports means that strong export growth has not been sufficient to prevent the merchandise trade gap from widening.
Services Exports Provide Some Support
The merchandise deficit does not represent India’s entire external trade position because the country also earns substantial foreign exchange through services exports.
Services exports were estimated at $35.89 billion in July, while services imports were estimated at $18.94 billion. That produced an estimated services trade surplus of approximately $16.95 billion.
Goods And Services Trade In July
| Component | July 2026 |
|---|---|
| Merchandise exports | $44.24 billion |
| Merchandise imports | $76.22 billion |
| Merchandise deficit | $31.98 billion |
| Estimated services exports | $35.89 billion |
| Estimated services imports | $18.94 billion |
| Estimated services surplus | $16.95 billion |
Services therefore provide an important offset to India’s goods deficit, particularly through areas such as information technology, business services and other professional services.
The Commerce Ministry estimated total exports of goods and services at $80.14 billion in July, representing 13.31% year-on-year growth.
Trade Deficit As A Share Of Total Trade Improves
Despite the increase in the absolute merchandise trade deficit, the government highlighted an improvement when the deficit is measured as a proportion of total merchandise trade.
The merchandise deficit represented 26.5% of total merchandise trade in July, compared with 27.3% a year earlier. Commerce Secretary Rajesh Agrawal said the deficit was lower as a percentage of total trade even though it was higher in absolute terms.
This distinction is important because India’s overall trade volumes have expanded.
Merchandise Trade Deficit Ratio
| Measure | July 2025 | July 2026 |
|---|---|---|
| Deficit as % of total merchandise trade | 27.3% | 26.5% |
| Absolute deficit | $27.88 billion | $31.98 billion |
The figures show that India’s trade gap has increased in dollar terms, but the deficit has become slightly smaller relative to the total value of merchandise trade.
US Remains A Major Export Market
The United States continued to be an important destination for Indian goods.
India’s merchandise exports to the US reached $33.49 billion during April-July, remaining broadly close to the level recorded during the corresponding period a year earlier.
Strong US demand is important for several Indian export sectors, particularly engineering goods, pharmaceuticals, electronics and other manufactured products.
At the same time, continued dependence on major markets means Indian exporters remain exposed to changes in tariffs, trade policies, freight costs and global demand.
Middle East Exports Recover
Exports to West Asian markets showed signs of recovery during July.
Shipments to the region increased 8.6% year-on-year to approximately $5.7 billion. This came despite disruptions and uncertainty caused by geopolitical tensions in the region.
The recovery is significant for sectors that rely on Middle Eastern markets and demonstrates that Indian exporters were able to maintain shipments despite elevated logistics challenges.
What The Trade Data Means For India
The July numbers present a mixed picture for India’s external sector.
On the positive side, merchandise exports reached a record for the month, with growth approaching 20%. Strong performance from petroleum products, electronics and engineering goods suggests that India’s export base continues to broaden.
However, imports are growing almost as quickly, and India’s dependence on crude oil and imported electronics continues to put pressure on the trade balance.
The combination of higher commodity prices, electronics imports and geopolitical disruptions could keep the merchandise deficit elevated if import growth continues to outpace exports.
The Bigger Picture
India’s July trade data highlights the two sides of the country’s economic expansion. Record merchandise exports demonstrate increasing competitiveness across several sectors, but strong domestic demand and dependence on imported energy, electronics and other commodities are simultaneously pushing imports higher.
The $31.98 billion merchandise deficit is therefore not simply a result of weak exports. In fact, exports grew faster year-on-year than imports in percentage terms. The larger deficit reflects the much bigger absolute value of India’s imports, particularly crude oil and electronics. Services exports provide an important cushion, but the merchandise trade gap remains a key factor for India’s external balance and currency stability.
Looking Ahead
India’s trade performance in the coming months will depend heavily on global commodity prices, geopolitical conditions, freight costs and demand in major export markets. If petroleum, electronics and engineering exports continue to grow while crude and other import costs moderate, the pressure on the trade balance could ease. Conversely, another increase in oil prices or continued rapid growth in electronics and other imports could keep the deficit elevated.
For policymakers, the latest numbers reinforce the importance of expanding high-value exports while deepening domestic production of critical components and reducing dependence on imported energy over time. India’s record July exports are encouraging, but sustaining faster export growth than import growth will remain crucial if the country wants to narrow its merchandise trade gap
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