India’s merchandise trade deficit narrowed to $21.88 billion in May 2025 from $22.09 billion a year ago, as both exports and imports saw a year-on-year decline. While global tensions—especially in West Asia—threaten trade stability, India’s services exports helped cushion the overall trade impact.
India’s Ministry of Commerce and Industry reported that the country’s merchandise trade deficit dropped to $21.88 billion in May 2025, a slight improvement from $22.09 billion in the same month last year. The trade gap—the difference between goods exports and imports—narrowed due to declines in both export and import values.
In May, merchandise exports slipped to $38.73 billion, down from $39.59 billion in May 2024, while imports dropped to $60.61 billion from $61.68 billion. This follows April’s sharp rise in the trade deficit to $26.42 billion, a five-month high, driven by an increase in imports.
However, intensifying geopolitical tensions—most notably the June 13 Israel-Iran conflict—are threatening global shipping routes critical to India. The Strait of Hormuz, through which over two-thirds of India’s crude oil imports and nearly half of its liquefied natural gas (LNG) imports pass, remains vulnerable amid escalating regional instability.
Shipping costs through West Asia have surged by up to 50%, according to exporters and trade associations, with rising insurance premiums, delays, and risks of cargo damage or diversion impacting Indian trade logistics.
The current Middle East crisis adds to a history of trade tension, including the India-Pakistan border conflict and US President Donald Trump’s earlier tariff policies that disrupted global trade flows. Trump had briefly imposed reciprocal tariffs on key trade partners, including India, and implemented a 10% universal import tariff. India and the US are currently negotiating a limited trade agreement to address such tariff barriers and improve market access.
Despite challenges in merchandise trade, services exports rose to $32.39 billion in May, from $29.61 billion a year ago. Services imports stood at $17.14 billion, compared to $16.88 billion in May 2024.
The combined exports of goods and services reached $71.12 billion in May 2025, up from $69.20 billion in the previous year, indicating that India’s services sector helped offset pressures from global headwinds and rising logistics costs.
