India's goods trade deficit hits 6-month high as imports rise amid Middle East conflict

India's merchandise trade deficit widened more than anticipated to $31.98 billion in July, driven by the impact of the Middle East conflict on the country's oil imports and global freight rates. This marked a six-month high, exceeding the forecasted $30.20 billion by Reuters economists.

Imports rose to $76.22 billion, compared to $70.84 billion in June, primarily due to higher crude oil prices and increased imports of electronics and gold. Electronics goods, including chips, saw a surge of over 44% year-on-year, reaching $14.37 billion in July. Gold imports also climbed nearly 5% to $4.16 billion. However, oil imports decreased slightly to $18.31 billion from $19.33 billion in June, reflecting the surge in global crude prices.

On the export side, goods shipments hit a record $44.24 billion for July, surpassing the previous July high of $38.34 billion in 2022, while exports in June stood at $40.41 billion. Engineering exports rose by 21% in June, and shipments to the Middle East increased by 8.6% year-on-year to $5.7 billion in July. The United States remained India's top export destination, with shipments valued at $33.49 billion in the April-July period, nearly matching last year's levels.

Despite a $16.95 billion services export surplus, the trade deficit highlights the pressure on India's external balance. Rising freight costs and shipping disruptions are squeezing exporters' margins, particularly in sectors like rice, textiles, pharmaceuticals, and engineering goods. The shipping industry and exporters are urging the government to engage with global shipping lines to address the impact of higher freight costs and container shortages.