New Delhi: India’s merchandise trade deficit declined to $21.88 billion in May this year from $26.42 billion in April, reflecting a stronger external sector, according to data released on Monday.
The trade deficit was lower on a year-on-year basis as well compared to the corresponding figure of $22.09 billion recorded in May 2024.
“Despite the global policy uncertainty regarding trade, we have done extremely well,” Commerce Secretary Sunil Barthwal told journalists.
He said that exports of electronic goods, including mobile phones, recorded the sharpest year-on-year rise of 54 per cent in May.
Exports of chemicals grew by 16 per cent, while pharmaceuticals rose 7.38 per cent, he added.
The merchandise exports in May 2025 were marginally down by 2.17 per cent, at $38.73 billion, from $39.59 billion in May 2024 amid growing geopolitical tensions. However, imports fell 1.7 per cent year-on-year to $60.61 billion during the month compared to $61.68 billion in May 2024.
Meanwhile, the trade in services showed an estimated surplus of $14.65 billion in May, as services exports rose to an estimated $32.39 billion while imports increased to $17.14 billion, the Commerce Secretary said.
The data also showed that in the April-May period of the first quarter of the current financial year, exports increased to $77.19 billion, while imports rose to $125.52 billion.
The narrowing of the trade deficit will also help to strengthen the rupee vis-a-vis the US dollar and comes at a time when the country’s foreign exchange reserves are nearing an all-time high.
India’s foreign exchange reserves surged by $5.17 billion to $696.66 billion for the week ended June 6, data released by the RBI on Friday showed.
The sharp rise during the week has brought the country’s forex kitty close to the historic high of $704.885 that was scaled at the end of September 2024.
For the week ending on June 6, foreign currency assets, a major component of the reserves, increased by $3.47 billion to $587.69 billion.
The gold component of the forex reserves increased by $1.6 million to $85.89 billion during the week. Central banks worldwide are increasingly accumulating gold as a safe-haven asset in their foreign exchange reserves amid uncertainty created by geopolitical tensions. The gold reserves currently amount to $83.582 billion. The share of gold maintained by the Reserve Bank of India (RBI) in its foreign exchange reserves has almost doubled since 2021.
An increase in the foreign exchange reserves reflects strong fundamentals of the economy and gives the RBI more headroom to stabilise the rupee when it turns volatile.
A strong forex kitty enables the RBI to intervene in the spot and forward currency markets by releasing more dollars to prevent the rupee from going into a free fall.
(IANS)
