Economy – India’s Trade Deficit Widens Amid Rising Oil and Gold Imports
Economy – Global trade outlook and India current account deficit analysis – India’s external trade position showed signs of pressure in April as higher crude oil prices and increased gold imports widened the country’s trade gap despite healthy growth in exports and strong services earnings.
India’s current account deficit could increase notably during the ongoing financial year if global crude prices remain elevated near USD 100 per barrel, according to a report by ICICI Bank Global Markets. The assessment comes at a time when geopolitical tensions in West Asia continue to disrupt energy markets and create uncertainty across global trade routes.
Export Growth Supported by Oil and Electronics
India began FY27 with a solid rise in merchandise exports. Outbound shipments climbed 14 per cent year-on-year to USD 43.6 billion in April, largely supported by a sharp increase in petroleum exports and steady growth in non-oil segments.
Oil exports surged 35 per cent compared to the same period last year, reaching USD 9.6 billion. The rise was mainly linked to higher international crude prices and improved refining margins. Non-oil exports also recorded healthy expansion, increasing 9 per cent annually to USD 34 billion.
Among major sectors, electronics exports touched a record USD 5.2 billion after registering a strong 40 per cent jump from a year earlier. Engineering products and chemicals also posted steady gains during the month. Exports of marine goods, minerals, and plastic products improved as well.
However, some traditional export categories faced weakness. Shipments of ceramics and glassware dropped sharply, while gems and jewellery, textile products, and agricultural exports also recorded declines.
Mixed Regional Trade Performance
Exports to the United States saw limited growth, rising just over 1 per cent to USD 8.5 billion. Analysts attributed the moderate improvement to gradual easing in tariff-related disruptions.
Trade with several non-US markets performed much better. Exports to countries including China, Hong Kong, Singapore, the United Kingdom, and Germany witnessed stronger momentum, helping overall exports to non-US destinations rise 17 per cent year-on-year.
In contrast, exports to West Asian countries declined significantly due to disruptions linked to the Strait of Hormuz situation. The report noted that shipments to the region fell 28 per cent compared to last year.
Import Bill Continues to Rise
India’s import expenditure also moved higher during April, increasing 10 per cent year-on-year to USD 71.9 billion. A major factor behind the increase was the sharp rise in gold imports, which jumped 82 per cent to USD 5.6 billion.
Non-oil and non-gold imports also expanded by 15 per cent, indicating stable domestic demand and continued industrial activity. Meanwhile, oil imports declined on a yearly basis due to a higher comparison base but rose sharply from March levels as crude prices climbed globally.
The country imported USD 18.6 billion worth of oil during the month, marking the highest monthly oil import value in nearly a year. Electronics and machinery imports also reached record levels and accounted for a significant share of the overall import basket.
Trade Deficit Expands Sharply
The combined impact of stronger imports and rising oil costs pushed India’s merchandise trade deficit to USD 28.4 billion in April, considerably higher than the USD 20.7 billion gap recorded in March.
Oil-related trade imbalance widened further, while the non-oil and non-gold deficit also expanded. After including services trade, India’s overall goods and services balance shifted into deficit territory at USD 7.8 billion, compared with a small surplus reported a month earlier.
Services Sector Offers Stability
India’s services sector continued to provide support to the broader external balance. Net services exports increased 29 per cent year-on-year to USD 20.6 billion in April, remaining comfortably above the average seen in the previous financial year.
Gross services exports rose 13 per cent to USD 37.2 billion, reflecting steady global demand for India’s information technology, business, and professional services.
Capital Inflows Remain Under Watch
The report also highlighted concerns regarding foreign investment flows. Foreign portfolio investor outflows have remained elevated in the early part of FY27, creating additional pressure on the country’s external account.
According to analysts, capital inflows may recover once global market volatility linked to technology and commodity sectors begins to ease. The report further suggested that simplifying compliance procedures and easing regulations could help improve investor confidence.
With oil prices remaining firm and gold imports still elevated, economists believe policy measures aimed at reducing non-essential imports may become necessary to maintain stability in India’s external sector.