NEW DELHI (Reuters)

India’s merchandise trade deficit narrowed sharply to US$21.88 billion in May, on account of lower imports, government data released on Monday (June 16) showed.

The trade deficit was lower than the US$25 billion expected by economists in a Reuters poll, and below April’s deficit of US$26.42 billion.

“Lower imports resulted in trade deficit reducing more than expected. Weakness in exports persists, reflecting uncertain global demand due to tariffs and softer commodity prices,” said Gaura Sen Gupta, chief economist at IDFC First Bank.

“We expect FY26 current account deficit to remain low at 1.5 per cent of GDP,” she added.

Goods exports stood at US$38.73 billion in May while imports were US$60.61 billion, compared with US$38.49 billion of exports and US$64.91 billion of imports in April.

Meanwhile, the trade in services showed an estimated surplus of US$14.65 billion in May, as services exports rose to an estimated US$32.39 billion while imports increased to US$17.14 billion, Trade Secretary Sunil Barthwal told reporters.

“Despite the global policy uncertainty regarding trade, we have done extremely well,” Barthwal said, adding that the fall in global crude oil prices had a dampening impact on exports.

Among product categories, exports of electronic goods, including mobile phones, saw the sharpest year-on-year jump of 54 per cent in May, while shipments of chemicals rose by 16 per cent and those of pharmaceuticals grew by 7.38 per cent, the trade secretary said.

India’s exports to the United States expanded in April-May to US$17.25 billion, up from US$14.17 billion a year earlier, suggesting that the US tariff hikes averaging 10 per cent in early April had a limited impact.

President Donald Trump’s flip-flop on sweeping import tariffs – along with uncertainty over the 90-day pause on reciprocal duties for major global trading partners, including a 26 per cent tariff for India until July 9 – has unnerved exporters, prompting many to front-load shipments.