India’s trade deficit contracts to 4-month low amid US deal push: What can countrymen expect?
New Delhi: India’s trade deficit tightened its belt in June, slimming down to USD 18.78 billion from USD 21.88 billion in May, according to the Commerce and Industry Ministry’s latest data.
Exports stayed nearly frozen at USD 35.14 billion, barely a hair’s breadth below last year’s USD 35.16 billion. Imports, however, shed some weight, dipping 3.71% year-on-year to USD 53.92 billion.
On the services front, India pocketed a healthy surplus of USD 15.62 billion, thanks to services exports of USD 32.84 billion against imports of USD 17.58 billion. Put together, total exports of goods and services clocked USD 67.98 billion in June, while total imports stood at USD 71.50 billion, leaving a modest net trade deficit of just USD 3.51 billion.
Commerce Secretary Sunil Barthwal admitted last month that global conflicts and supply chain snarls are testing exporters’ nerves, but assured that the government is working “proactively” to fix headaches around shipping and insurance.
All this unfolds while India is caught in a tense trade tango with the US. Washington is pushing hard for wider access to sell its farm and dairy goods in India — a sensitive issue for millions of small Indian farmers. New Delhi, meanwhile, is hustling to ink an interim pact before July 9 to dodge former President Trump’s looming 26% tariff threat, and to carve out tariff relief for Indian-made textiles, leather, and footwear.
Trump, never one to wait quietly, has threatened to start mailing out new tariff letters to trade partners as soon as Friday, even as last‑minute negotiations scramble for a truce.
Despite the geopolitical suspense, India’s trade pulse in Q3 FY25 (October–December 2024) showed what the NITI Aayog politely calls “cautious resilience” — proof, perhaps, that even with global drama swirling, India’s trade engine still has a few clever moves left.
What can Indians expect?
- Relief on the rupee and macro front: A smaller trade deficit helps ease pressure on India’s current account, which supports a steadier rupee. That’s good news for inflation, fuel prices, and the cost of imported goods.
- Possible export boost: If India clinches an interim deal with the US, sectors like textiles, leather, and footwear could get tariff concessions — meaning more orders, better margins for Indian manufacturers, and potentially more jobs in labour-intensive industries.
- Limited change on food prices: India is unlikely to fully open its markets to US dairy and farm products because of small farmers' sensitivities. So don’t expect a flood of cheap American cheese or cornflakes just yet — prices of local agricultural products should remain stable.
- More stability for businesses: A balanced trade gap and an improved services surplus make the economy look healthier to global investors. That means more stable business sentiment, which could encourage investment and hiring.
- Still some risk of higher tariffs: If negotiations drag or stall, India could face steep US tariffs on key exports. That could hit exporters’ earnings and ripple down to jobs in affected sectors.