Context: India Merchandise Trade Deficit
India’s merchandise exports reached a record high of $45.2 billion in May 2026, led by engineering goods, electronics and chemicals. However, imports grew faster, resulting in a wider merchandise trade deficit.
Trade Basics
Merchandise Trade
- Trade in physical goods.
Services Trade
- Trade in services such as IT, finance and tourism.
Trade Deficit
- Imports are greater than exports.
Trade Surplus
- Exports are greater than imports.
PYQ Link
- India generally runs a merchandise trade deficit.
- India generally records a services trade surplus.
- Services surplus partly offsets the merchandise deficit and reduces pressure on the Current Account Deficit.
Major Imports: Value Addition
- Crude Petroleum: $134.7 billion
- Gold: $72 billion
- Vegetable Oils: $19.5 billion
- Fertilisers: $14.5 billion
Significance
- Record exports show improved external demand and export competitiveness.
- Faster import growth widens the trade deficit.
- Crude petroleum and gold remain major import-pressure items.
- Services surplus remains important for stabilising the external sector.
