Narrowing Trade Deficit in June 2025 Makes India’s FY26 Story Comfortable
India’s merchandise trade deficit eased to $18.78 billion in June 2025, as imports contracted faster than exports. With a strong $15.26 billion services surplus, the overall external balance looks steady — setting a positive tone for FY26’s current account outlook.
First, A Look At The Trade Deficit Story For June 2025
The merchandise trade deficit for June 2025 narrowed sharply to $(18.78) billion, against $(21.88) billion in May 2025 and $(26.42) billion in April 2025. While exports were down in June, the imports fell much faster, leading to the narrowing of the merchandise trade deficit. While the merchandise trade deficit came in at $(18.78) billion for June, it was substantially offset by the $15.26 billion surplus in services trade account; resulting in overall deficit of $(3.52) billion.
| Macro Variables (Year-to-Date) | FY26 (Apr-Jun) | FY26 (Apr-May) | FY25 (Apr-Jun) | Change YOY (%) |
|---|---|---|---|---|
| Merchandise Exports | 112.17 | 77.19 | 110.06 | 1.92% |
| Merchandise Imports | 179.44 | 125.52 | 172.16 | 4.23% |
| Total Merchandise Trade | 291.61 | 202.71 | 282.22 | 3.33% |
| Merchandise Trade Deficit | -67.27 | -48.33 | -62.10 | 8.33% |
| Services Exports | 98.13 | 65.24 | 88.46 | 10.93% |
| Services Imports | 51.18 | 34.05 | 48.78 | 4.92% |
| Total Services Trade | 149.31 | 99.29 | 137.24 | 8.79% |
| Services Trade Surplus | 46.95 | 31.19 | 39.68 | 18.32% |
| Combined Exports | 210.30 | 142.43 | 198.52 | 5.93% |
| Combined Imports | 230.62 | 159.57 | 220.94 | 4.38% |
| Overall Trade Volume | 440.92 | 302.00 | 419.46 | 5.12% |
| Overall Trade Deficit | -20.32 | -17.14 | -22.42 | -9.37% |
| Data Source: DGFT and RBI |
How June 2025 Data Compares With 12-month Averages?
Let us compare June data points with previous 12-month averages. Last 12 months, average merchandise exports was $36.69 billion, but average merchandise imports stood at $60.25 billion. For June 2025; exports and imports were sharply lower than the averages of the last 12 months. Average trade deficit for last 12 months was $(23.56) billion; but the good news is that June 2025 trade deficit was sharply lower at $(18.78) billion. What about total trade? At $89.06 billion for June 2025; it was well below the 12-month average of $96.93 billion.
What We Infer From The Trade Data For FY26
Here is a quick look at the 3 trade balances and how they compare with the year ago period.
- Let us start with the merchandise trade deficit for FY26 (Apr-Jun). At $(67.27) billion, the quarterly trade deficit was 8.33% higher than the first quarter of FY25. That is more due to a 4.23% rise in imports, dwarfing the 1.92% growth in goods exports.
- Let us turn to the services trade surplus for FY26 (Apr-Jun). At $46.95 billion, the quarterly services surplus was 18.32% higher than first quarter of FY25. That is more due to a 10.93% rise in service exports, dwarfing 4.92% growth in service imports.
- Interestingly, the overall deficit for Q1FY26 at $(20.32) billion, was lower than the overall deficit of $(22.42) billion in Q1FY25. The good news is that the ratio of services exports to goods exports in FY26 is up from 80.4% to 87.5%. Of course, this can also be partly attributed to the tariff concerns slowing export of goods.
- What does this imply for the current account deficit (CAD) for the full year FY26? These are still early days, but we had another impressive reporting of CAD by the Indian economy for FY25 at just 0.6% of GDP, thanks to a surprisingly large trade surplus in Q4FY25. As of now, it looks like CAD should continue to be comfortable.
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