Crisil Economy First Cut: Trade deficit at an 8-month high

India's merchandise trade deficit rose to an eight-month high of $27.4 billion in July 2025, compared with $24.8 billion in July 2024 and $18.8 billion in June 2025, as growth in imports outpaced that in exports.

Merchandise exports turned positive after two months, growing 7.3% on-year to $37.2 billion in July (vs -0.1% in June), ahead of the tariffs being imposed by the United States (US) from August. This was driven by a sharp rise in the exports of core goods (12.7% in July vs 4.8% on-year in June) and gems and jewellery (28.9% vs -20.4%). However, oil exports slid 25% on-year for the third straight month in July (vs 16% fall in June) 

Merchandise imports rose a sharper 8.6% on-year to $64.6 billion (vs -3.7% in June), following two months of contraction. Gems and jewellery (25.9% vs -19.1%) and oil imports (7.4% vs -8.4%) grew on-year after declining in May and June. Core import growth also surged to 6.9% in July from 0.1% in June.

India’s merchandise trade deficit has come under pressure this fiscal due to tariff hikes and slowing global growth. However, India’s current account deficit (CAD) is expected to remain manageable, supported by the surplus in services trade, healthy remittances and soft crude oil prices. We forecast CAD to be at 1.3% of GDP this fiscal, compared with 0.6% last fiscal.