India’s August exports rise 26.1%, trade deficit narrows to $26.9 billion

Kolkata: India’s merchandise exports accelerated sharply in August, rising 26.1% year-on-year to $43.8 billion from 19.6% growth in July, even as slower import growth helped narrow the merchandise trade deficit to $26.9 billion, signalling continued resilience in external trade despite global and geopolitical disruptions.

Export growth was broad-based, with core exports — excluding oil and gems and jewellery — expanding 22.7% in August compared with 14.9% in July. Gems and jewellery exports returned to growth, rising 0.7% year-on-year against a 2.7% contraction in July, while oil exports remained robust, growing 63.3%.

Shipments to the US rose 21.8% year-on-year in August, accelerating from 12.8% growth in July. Exports to several Asian markets, including Malaysia, Singapore and Japan, also gathered pace. However, exports to the UAE and Saudi Arabia declined 26.1% and 17.5%, respectively, amid renewed disruptions in West Asia.



The strong export performance came despite a low statistical base, with growth also benefiting from improvement across several sectors. Agricultural exports gained momentum on higher shipments of rice and marine products, while meat, dairy and poultry exports continued to register double-digit growth.

Core exports saw broad-based improvement across pharmaceuticals, chemicals, engineering goods and electronic items. Labour-intensive sectors also showed signs of recovery, with cotton yarn and fabrics, manmade yarn and fabrics, and gems and jewellery recording faster growth than in July. The decline in ready-made garment and leather exports also moderated.

Imports, meanwhile, grew at a slower pace of 14.1% year-on-year to $70.7 billion in August, compared with 17.5% in July. The moderation was driven largely by a sharp contraction in gems and jewellery imports, which fell 34.8%, with gold imports plunging 57.7%. Core import growth also eased to 18.9% from 20.3%.

Oil imports, however, accelerated to 25.8% growth from 17.6%, largely reflecting a low statistical base.

The combination of faster exports and slower imports brought the merchandise trade deficit down to $26.9 billion in August from $32 billion in July and $27.2 billion a year earlier. This was the narrowest deficit since March, when trade flows were affected by supply disruptions following the emergence of the West Asia conflict.

Services trade remained a key cushion for the external account. Preliminary estimates indicate a services surplus of $17.5 billion in August, marginally lower than $17.6 billion in July but substantially higher than $15.6 billion a year earlier.

Despite the improvement in August, the external sector is likely to face pressure through the year from higher crude oil prices and global trade disruptions. Crisil Intelligence expects crude oil prices to average $88-93 a barrel this fiscal, compared with $70.3 a barrel last fiscal.

It expects the current account deficit to widen to 1.5% of GDP this fiscal from 0.6% last fiscal, with higher crude prices remaining the key driver of the goods trade deficit. Slowing global growth and disruptions to global trade could weigh on merchandise exports, although resilient services exports are expected to provide some offset.

A sustained spike in crude oil prices could put further upward pressure on the CAD outlook, even as the August trade data point to a stronger start for merchandise exports and a meaningful moderation in the trade gap.