India’s trade deficit narrowed in May 2025, offering a marginal improvement in the country’s external trade balance despite ongoing global economic headwinds. According to data released by the Ministry of Commerce, the trade deficit stood at $21.88 billion in May 2025, down from $26.42 billion in April 2025 — a five-month high — and slightly lower than the $22.09 billion recorded in May 2024.
This easing in the trade gap reflects a simultaneous drop in both exports and imports, primarily influenced by subdued global demand, continuing trade tensions, and negotiation uncertainties with major trading partners such as the United States and the European Union.
Key Trade Figures – May 2025
| Category | Value (in $ Billion) | Change (% YoY) |
|---|---|---|
| Merchandise Exports | 38.73 | ↓ 2.2% |
| Merchandise Imports | 60.61 | ↓ 1.76% |
| Trade Deficit | 21.88 | Improvement from $22.09B |
Key Highlights:
- Exports Slow Down: India’s merchandise exports declined by 2.2% year-on-year, totaling $38.73 billion. The drop is attributed to weaker global demand, especially in sectors such as textiles, engineering goods, and chemicals.
- Imports Also Decline: Imports shrank by 1.76%, reaching $60.61 billion. This dip was mainly due to reduced crude oil and electronics imports, possibly reflecting both lower global prices and domestic demand shifts.
- Deficit Narrows: The narrowing of the trade deficit to $21.88 billion suggests some resilience in India’s external trade position, despite the challenges posed by fluctuating global trade dynamics.
Global Trade Context
India’s trade landscape in May 2025 was shaped by several international developments:
- US Tariffs and Trade Talks: Ongoing tariff disputes and negotiations between the U.S. and its trade partners are creating volatility in global supply chains. India’s trade with the U.S., one of its key export destinations, continues to face uncertainty.
- EU Deal Negotiations: Talks on a potential Free Trade Agreement (FTA) with the European Union are yet to yield concrete results, affecting market confidence.
- Geopolitical Tensions: Global trade flows remain sensitive to geopolitical developments, including sanctions, supply chain diversification efforts, and conflicts in key shipping regions.
Conclusion
India’s trade performance in May 2025 shows a moderate improvement in its external balance. While both exports and imports contracted, the relative slowdown in imports helped reduce the trade deficit. However, the overall outlook remains cautious, with global trade tensions, negotiations with key partners, and sectoral performance all influencing future trends.
As India navigates these complexities, policymakers and industry stakeholders will need to closely monitor external conditions and diversify export markets to strengthen trade resilience.
Glottis Limited 
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