India’s Export Outlook: Positioned for a Strong Rebound in H2 2025 Amid Stabilising Global Trade
Resilience Amidst Uncertainty: India’s Trade Performance in May 2025
India’s export sector has demonstrated considerable resilience in May 2025 despite a challenging global environment marked by geopolitical uncertainty and volatile commodity prices. According to experts and data shared by industry bodies, total exports from India—combining merchandise and services—grew by 2.8% year-on-year to USD 71.12 billion, compared to USD 69.20 billion in May 2024.
The Federation of Indian Export Organisations (FIEO) highlighted that this growth was largely driven by the services sector, including software, consultancy, and financial services. Although merchandise exports slightly declined to USD 38.73 billion, the strong performance in services helped balance the overall export portfolio.
Sectoral Insights: Engineering Exports Hold Steady
Engineering exports—a critical component of India’s merchandise trade—showed notable stability. Engineering goods exports declined marginally by 0.8%, from USD 9.97 billion in May 2024 to USD 9.89 billion in May 2025, according to the Engineering Export Promotion Council (EEPC) of India.
Pankaj Chadha, Chairman of EEPC, attributed this to the sector's resilience amid rising input costs and continuing international headwinds. The escalation of tensions in the Middle East, particularly the Israel-Iran conflict, has led to concerns about oil prices, logistics delays, and potential blockade risks at the Strait of Hormuz, which could directly impact global shipping lanes.
Import Trends and Trade Deficit Correction
India’s overall imports (goods and services) in May 2025 stood at USD 77.75 billion, down from USD 78.55 billion in May 2024. Specifically, merchandise imports eased to USD 60.61 billion, offering some relief on the trade balance.
Notably, India’s merchandise trade deficit narrowed to USD 21.9 billion in May 2025 from USD 26.4 billion in April, a significant monthly correction. This development is expected to moderate the current account deficit (CAD) for Q1 FY2026.
Economic Outlook: CAD Under Control, Crude Oil Prices in Focus
Aditi Nayar, Chief Economist at ICRA, stated that this narrowing trade deficit is likely to limit the CAD to around USD 13 billion for the quarter, or approximately 1.3% of India’s GDP. If crude oil prices average USD 75 per barrel for the rest of FY2026, the annual CAD could remain in the range of 1.2–1.3% of GDP.
She emphasized that the contraction in exports in May 2025 was mainly due to reduced oil exports. However, non-oil exports continued to post year-on-year growth, led by sectors such as electronics, garments, chemicals, and marine products, reinforcing the strength of India’s diversified export basket.
Future Outlook: H2 2025 Could Mark a Turning Point
According to FIEO President S C Ralhan, the second half of 2025 could present favourable conditions for Indian exporters, assuming geopolitical tensions ease and global trade logistics stabilize. He credited the performance of Indian exporters to their ability to adapt quickly, supported by strategic policy interventions.
“Exporters are navigating a turbulent global environment with agility, and India is well-positioned to regain a strong export growth trajectory as conditions improve,” Ralhan said.
Conclusion: Strategic Stability and Sectoral Strength Set the Stage for Export Growth
Despite short-term global headwinds, India's trade ecosystem reflects strong fundamentals. Continued momentum in services, resilience in engineering exports, and corrective shifts in the trade deficit and import composition suggest India’s export engine is gearing up for a sustained rebound in H2 2025.
Key factors to watch include global crude oil trends, Middle East stability, and continued support for high-performing sectors. With diversified growth drivers and contained macroeconomic risks, India’s external sector appears ready to capitalise on the next wave of global recovery.
Comments
Post a Comment