India's exports have shown resilience amidst global challenges, with merchandise exports rising by 5.8% to $109.96 billion in the first quarter of fiscal 2025, according to CRISIL.
Despite a slowdown in growth in June, non-oil exports maintained momentum at 7.7%. However, a significant 18.2% contraction in oil exports contributed to a widening merchandise trade deficit to $21 billion.
"On a cumulative basis, merchandise exports rose 5.8% to $109.96 billion for the first quarter of fiscal 2025, from $103.9 billion in the year-ago period. This growth in exports in the first quarter of fiscal 2025 suggests that India has managed to keep its exports resilient in the wake of the ongoing conflict in Europe and the Middle East," CRISIL said.
According to CRISIL, while India's fiscal year began positively with merchandise exports showing growth in the first quarter, the widening trade deficit due to higher import growth remains a concern. The government's emphasis on foreign-trade agreements (FTAs) is anticipated to boost exports, although challenges such as potential dumping from China following US tariff hikes loom.
"That said, growth in imports so far has surpassed exports, thus widening the trade deficit. This will remain a key monitorable, especially since the US has announced tariff hikes on Chinese imports, which could potentially lead to some dumping by China in the larger Asian market, including India," added CRISIL.
"Cumulative imports rose at a faster pace of 7.7% to $172.4 billion from $160 billion. As a result, trade deficit widened to $62.44 billion from $56.1 billion. It is also noteworthy that the trade deficit widened due to a higher oil trade deficit, while the non-oil trade deficit narrowed compared with last year," it added.
In the services sector, exports surged by 10.2% year-on-year to $29.76 billion in May, while services imports moderated to 5.4%, resulting in a services trade surplus of $13.02 billion. Cumulative imports grew at a faster pace of 7.7% to $172.4 billion, leading to an expanded trade deficit of $62.44 billion.