India’s merchandise trade deficit widened to USD 28.21 billion in May 2026, but easing crude oil prices and increased duties on gold imports are expected to provide relief to the country’s import bill and improve the external trade balance in the coming months, according to a report by Dolat Capital.
The report highlighted that India’s petroleum imports surged to USD 22.7 billion in May 2026, up from USD 14 billion in the same month last year. Despite the rise in imports, export performance remained strong, with non-petroleum exports increasing to USD 70.7 billion during April–May FY27, compared with USD 64 billion in the corresponding period of the previous fiscal.
Non-petroleum and non-gems-and-jewellery exports also recorded healthy growth, rising to USD 65.9 billion from USD 59.2 billion a year earlier, reflecting improving demand across a broader range of sectors.
On the import side, non-petroleum imports remained robust at USD 104.1 billion, up from USD 90.8 billion a year ago, driven by strong demand for electronics, machinery, capital goods and industrial inputs. The trend underscores continued strength in domestic investment activity and consumer demand.
According to Dolat Capital, India’s merchandise imports climbed 20.62 per cent year-on-year to USD 73.41 billion in May 2026, while cumulative imports for April–May reached USD 145.35 billion, marking a 15.14 per cent increase. Merchandise exports rose 18 per cent year-on-year to USD 45.20 billion in May, with cumulative exports for the first two months of FY27 growing 16.09 per cent to USD 88.91 billion.
The report noted that India’s export growth is becoming increasingly broad-based across products and markets, reducing dependence on a limited number of commodity segments. It also pointed to deeper trade engagement with Asia, the Middle East and Africa, which is helping diversify geopolitical risks and strengthen resilience against regional disruptions and supply-chain shocks.
Dolat Capital said softer crude oil prices, supported by easing geopolitical tensions in West Asia, could significantly reduce the country’s oil import bill and help narrow the trade deficit. Additionally, petroleum product exports are expected to benefit from a favourable excise duty structure and strong pent-up demand in global markets.
Higher import duties on gold are also likely to curb non-essential imports, providing further support to the trade balance.
“Together, these factors support a more balanced and resilient external sector outlook, with trade increasingly anchored by manufacturing competitiveness, investment demand and diversified global partnerships,” the report said.
