​Some cheer: On India’s trade data  

India’s trade data for the first quarter of this financial year (Q1FY26) and for June 2025 are leading to some room for cheer but there is considerable concern as well. The Commerce Ministry’s monthly export-import data indicate that June’s merchandise trade saw the sharpest uptick in outbound shipments to the U.S. in 14 months, at a growth rate of 23.5% to $8.3 billion. This was likely aided by importers wishing to stock up before the July 9 “pause” in “reciprocal tariffs”, but now extended to August 1. While overall goods exports in June almost stayed flat at $35.14 billion ($35.16 billion, last June), likely on account of softer crude oil prices, Q1FY26 registered a marginal year on year growth of 1.92% at $112.17 billion. Despite the widening year on year merchandise trade deficit to $67.26 billion ($62.1 billion, Q1FY25), it is the impressive growth in services exports, by almost 11% to $98.13 billion ($88.46 billion, Q1FY25) that has aided in shrinking India’s overall trade deficit by 9.4% in Q1FY26. This mirrors years of India’s trade trajectory, where services have outperformed goods exports.

It is important to note that refined petroleum products have traditionally constituted the largest chunk of India’s goods export (at about 15%). While many believe U.S. President Trump is unlikely to stay the course on his threat of a 100% “secondary tariffs” on countries buying Russian crude — to pressure Moscow to end its invasion of Ukraine — it hits an underbelly in India’s merchandise trade. India overtook China recently to become the largest importer of Russian crude, forming 36% of its oil imports. This has helped India leverage the cost arbitrage as western European nations maintain a ban on Russian crude imports. But Mr. Trump’s threat makes India’s need to diversify its fuel and energy imports more urgent, as it focuses on electrifying transport and ramping up renewables. It also highlights the need for India to diversify and grow merchandise trade, by further leveraging its sprawling, labour-intensive micro, small and medium enterprises, which constitutes almost half (46%) its goods exports. Exports in electronic goods (46.93%), tea (32.64%), meat, dairy and poultry (19.7%) and marine products (13.33%), saw steady growth this June when compared with last June. But overall goods exports excluding petroleum and gems and jewellery were almost flat in the same period. With a fortnight to go and three rounds of negotiations to scramble a ‘mini deal’ before the autumn deadline to reach a Bilateral Trade Agreement, the government has its task cut out to reach a favourable outcome. The stakes could not be higher as the U.S. has constituted the largest share of India’s overall exports for some years now, at nearly a fifth (17.7%) of total exports in the last fiscal alone.