India’s Exports Rise 2.77% in May to $71.12 Billion; Trade Deficit Narrows

17 Jun India’s Exports Rise 2.77% in May to $71.12 Billion; Trade Deficit Narrows

This article covers “Daily Current Affairs”  and the Topic India’s Exports Rise 2.77% in May to $71.12 Billion; Trade Deficit Narrows

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GS-3- Economics- India’s Exports Rise 2.77% in May to $71.12 Billion; Trade Deficit Narrows

FOR PRELIMS

What are the main reasons for the increase in India’s services exports in 2025?

FOR MAINS

Why did India’s goods exports decline in May 2025? What can be done to improve them?

Why in the News? 

India’s overall exports, including both merchandise and services, rose by 2.77% year-on-year in May 2025 to $71.12 billion, up from $69.20 billion in May 2024, as per Commerce Ministry data. This growth was driven by a significant rise in services exports, which increased to $32.39 billion from $29.61 billion, even as merchandise exports dipped slightly to $38.73 billion. Imports declined marginally to $77.75 billion, helping the trade deficit narrow to $6.62 billion from $9.35 billion a year earlier. Over April–May 2025, cumulative exports grew 5.75% to $142.43 billion, while imports rose 6.52% to $159.57 billion. However, the trade deficit during this period widened slightly to $17.14 billion, compared to $15.12 billion in April–May 2024.

Trade Performance Overview

1. Overall Growth: India’s exports rose by 2.77% in May 2025 to $71.12 billion, compared to $69.20 billion last year.
2. Merchandise Exports Dip: Goods exports fell slightly to $38.73 billion from $39.59 billion in May 2024.
3. Services Exports Rise: Services exports increased to $32.39 billion, up from $29.61 billion.
4. Moderate Import Decline: Total imports declined to $77.75 billion from $78.55 billion in May 2024.
5. Improved Trade Balance: The trade deficit narrowed to $6.62 billion, from $9.35 billion a year ago.
6. Service Sector Cushioning: Services played a crucial role in balancing overall trade performance.
7. Lower Import Bill: Decline in oil and commodity prices contributed to reduced imports.
8. Stability Amid Global Uncertainty: Despite global challenges, India’s external sector showed resilience.

Sectoral Breakdown

1. Underperforming Sectors: Exports of textiles, gems & jewellery, and engineering goods witnessed declines.
2. Export Challenges: Factors such as weak global demand and higher freight costs affected merchandise trade.
3. Resilient Sectors: Electronics, pharmaceuticals, and agro-products showed relative stability.
4. IT-Led Services Growth: Growth in software services, BPO, and consulting boosted overall services exports.
5. Global IT Demand: India benefited from demand for cloud computing, AI solutions, and cybersecurity services.
6. Tourism Recovery: A rebound in travel and tourism services added to services export growth.
7. Knowledge Services Expansion: Exports of education, design, and research-based services are gaining traction.
8. Diversification in Services: India is evolving from IT-only to a broad-based service exporter.

Fiscal Year-to-Date Performance

Implications for the Economy

1. Current Account Impact: Narrower monthly trade deficit helps improve the Current Account Balance (CAB).
2. Rupee Stability: Better trade data supports currency stability and investor confidence.
3. Offsetting Weakness: Services exports are mitigating the decline in goods exports.
4. Employment Effects: Service sector growth supports white-collar employment, particularly in urban hubs.
5. Forex Reserve Support: Rising exports contribute to foreign exchange reserves and macro stability.
6. Inflation Moderation: Controlled import bill helps manage imported inflation risks.
7. MSME Concerns: Merchandise export slowdown may impact MSME-led sectors significantly.
8. GDP Growth Linkage: Strong trade performance is essential for sustaining India’s GDP growth trajectory.

Government Measures and Trade Policy

1. PLI Incentives: Production Linked Incentive schemes promote high-value and strategic exports.
2. FTAs and CEPA: India is leveraging FTAs with UAE, Australia, and others for greater market access.
3. Service Export Push: Special focus on education, healthcare, and fintech services in policy planning.
4. Digital Infrastructure: Platforms like ICEGATE and DGFT portal are streamlining trade logistics.
5. Market Diversification: India is exploring Africa, Latin America, and Central Asia to expand export destinations.
6. Global Trade Engagement: Active participation in WTO, IPEF, and bilateral dialogues to resolve trade issues.
7. MSME Export Support: Capacity building, technology upgradation, and financial aid being extended to MSMEs.

Global Trade Context

1. Uneven Recovery: Global trade recovery remains inconsistent, influenced by conflicts and inflation.
2. Demand Sluggishness: Export markets like the EU and US are witnessing demand fatigue.
3. China’s Comeback: China’s renewed export push is heightening competition for Indian products.
4. Monetary Tightening Effects: High interest rates globally have reduced import appetite.
5. Rising Protectionism: Trade barriers and non-tariff restrictions are affecting India’s market access.
6. Opportunity from Friend-shoring: India is well-placed to benefit from supply chain realignment.
7. Commodity Price Swings: Prices of crude oil, fertilisers, and metals are influencing trade costs.
8. Peer Comparison: India’s performance is relatively strong among emerging economies like Brazil and Indonesia.

Way Forward

1. Boost Manufacturing: Strengthen productivity and output in key industrial export sectors.
2. Make in India Push: Enhance domestic capacity in electronics, defence, and renewables.
3. Brand India: Promote Indian products globally through branding and quality standardisation.
4. Explore New Markets: Expand trade relationships with under-tapped regions like Africa and Latin America.
5. Improve Logistics: Invest in port infrastructure, logistics parks, and seamless customs processes.
6. Empower MSMEs: Provide credit, training, and technology access to small exporters.
7. Digital Export Expansion: Promote e-commerce exports, especially in handicrafts and niche sectors.
8. Reduce Import Dependence: Encourage domestic alternatives in electronics, energy, and capital goods.

Conclusion

India’s trade story in May 2025 reveals both resilience and opportunity. Services exports are increasingly becoming the backbone of external trade, even as merchandise faces global headwinds. A balanced and strategic approach — combining manufacturing push, services diversification, and market expansion — will be key to sustaining export momentum, managing the trade deficit, and ensuring macroeconomic stability in an uncertain global environment.

Prelims Questions

Q. Consider the following statements with reference to India’s trade performance in May 2025:
1. India’s overall exports grew due to a sharp increase in merchandise exports.
2. Services exports helped narrow the trade deficit.
3. Imports in May 2025 were higher than in May 2024.
Which of the statements is/are correct?
a) 1 and 2 only
b) 2 only
c) 1 and 3 only
d) 2 and 3 only

Answer: B

Mains Questions

Q.  India’s trade performance in May 2025 reflects a mixed outlook for the external sector. While services exports remain strong, merchandise trade faces global headwinds. Discuss the key trends, sectoral dynamics, and implications for the economy. Suggest a policy roadmap to ensure a stable and growth-oriented trade regime

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