Crisil Economy First Cut: Skidding on oil

After remaining subdued in the previous two months, India’s merchandise shipments slipped into negative territory, declining 0.8% on-year to $36.6 billion in February (vs 0.6% growth in January).

• This was a result of a steep on-year decline in exports of petroleum products (-40.0% vs 8.7% growth in January).
• In contrast, export performance improved for both gems and jewellery (4.1% vs -23.0%) and the core segment¹ (6.6% vs 2.0%). The former saw an on-year growth in exports after two successive months of decline.

While exports declined, imports surged 24.1% on-year to $63.7 billion compared with 19.9% in January. Oil imports accelerated (9.1% on-year growth vs -0.2%). Notably, oil prices picked up in February (Brent crude prices surged to $71.1/barrel in February from $66.8/barrel in January). Meanwhile core imports² (14.0% vs 2.5%) also grew faster possibly reflecting strenghtening domestic demand. Growth in gem and jewellery imports moderated (157.0% vs 242.4%), though staying at elevated levels.

With growth in merchandise imports far outpacing that of exports, the merchandise trade deficit widened significantly to $27.1 billion in February from $14.4 billion a year ago. However, it was narrower than $34.7 billion in January.

During April-February, merchandise exports grew 1.8% on-year and imports rose 8.6%. Core exports and imports picked up 5.9% and 8.6%, respectively.

In terms of country wise performance, merchandise exports to the US declined 12.9% on-year in February while exports to the rest of the world rose by 2.5%. Within the latter, however, exports to China increased by 32.4% on-year.

Meanwhile, growth in services exports moderated to 9.8% on-year to $38.2 billion in January vs 13.0% in December, However, with services imports declining, the services trade surplus remained a healthy $21.5 billion in January (vs $18.0 billion in the year-ago period and $22.7 billion in December).

Cumulatively, trade deficit (goods plus services) in the April to January period stood at $105.7 billion in fiscal 2026 compared with $93.5 billion in the corresponding period a year ago.

¹ Goods exports excluding the gems and jewellery and petroleum segments
² Goods imports excluding the gems and jewellery and petroleum segments