India Trade Deficit June 2025 Narrows to $20.7 Billion

India Trade Deficit: India’s merchandise trade deficit eased to USD 20.7 billion in June 2025, down from USD 21.9 billion in May, offering a small but significant reprieve amid ongoing global volatility. The dip was highlighted in the latest research note by Union Bank of India (UBI), attributing the improvement to declining crude oil prices, muted gold imports, and a smarter sourcing strategy in response to commodity market shifts.

India Trade Deficit: Oil Imports Dip Despite Rising Brent

Oil, historically India’s largest import component, played a central role in easing the trade gap. Global crude oil prices witnessed a brief correction following the temporary ceasefire between Israel and Iran, coupled with increased output from OPEC+ nations. Although Brent crude rose to USD 69.80 per barrel in June, up from USD 64.01 in May, the overall supply scenario remained benign.

According to energy intelligence platform Vortexa, India’s crude oil imports dipped slightly to 4.66 million barrels per day (mbpd) in June from 4.72 mbpd in May.

Even more impactful was India’s recalibrated oil sourcing strategy. The country significantly increased purchases from Russia and the United States, reducing its dependency on the geopolitically sensitive Middle East, especially the Strait of Hormuz.

• Russian oil imports surged to a two-year high of 2–2.2 mbpd.

• U.S. oil imports skyrocketed by over 270% year-on-year in the first four months of 2025.

This diversification helped contain risks and stabilise import costs.

However, not all metrics were positive. India’s petroleum product exports declined 10% in June, falling to 1.19 mbpd from 1.32 mbpd in May. Compared to last year, exports were down 3.7%, muting the overall trade deficit recovery.

Gold Imports Shrink as Prices Hit Record Highs

India’s love for gold took a backseat in June as global prices skyrocketed, averaging USD 3,353/oz — a 5% month-on-month and 32% year-to-date surge.

High prices, tighter regulations, and weak consumer demand during a traditionally lean buying season discouraged imports. Preliminary customs data showed gold imports fell to 30.56 tonnes in May, down from 34.87 tonnes in April, with early projections indicating an even lower tally for June.

This steep price barrier worked in India’s favour, further shrinking India’s trade deficit in June 2025.

India Trade Deficit: Coal Imports Remain Steady Amid Power Demand

Coal shipments, a critical input for India’s power and industrial sectors, remained relatively stable. In June, the country imported 16.59 million tonnes (MT) through major ports — a 1.2% increase year-on-year, but 2.1% lower than May.

Thermal coal, which accounted for 70.2% of total coal imports, saw a 7.2% rise from last year, reflecting steady energy demand during early summer months.

Trade Enforcement Tightens with Policy Interventions

In tandem with supply-side reforms, the Indian government intensified trade policy enforcement. Among the key interventions:

• Anti-dumping duties on four Chinese-origin chemicals to protect domestic manufacturers.

• Import bans on jute and woven fabrics from Bangladesh are being cited for regulatory violations.

• Potential restrictions on iron ore pellet imports from Oman, amid claims that shipments were being rerouted from Iran, undercut local producers.

These policy measures are part of a broader effort to recalibrate India’s external trade posture and safeguard strategic sectors.

Outlook: Commodity Prices Will Be the Swing Factor

Despite signs of easing, the UBI report warned that the India trade deficit in June 2025 might only be temporarily lower. “Any sustained rise in global commodity prices — particularly oil and metals — could widen the trade gap in the coming months,” it noted.

Still, soft global demand and a drop in India’s outbound shipments may act as a counterbalance, helping prevent the trade deficit from spiraling.

“Going forward, commodity price trends will remain critical in assessing the trajectory of India’s trade deficit,” the report concluded.

Also Read : Chip Design of India at Risk After US Lifts China EDA Ban