India’s merchandise exports and imports expanded by double digits for the fourth consecutive month in July 2026, largely reflecting the impact of elevated commodity price inflation, which boosted the growth in value terms. Merchandise imports touched the highest level in 9 months, boosted by a 20%-plus year-on-year (YoY) expansion in items like coal, fertilisers, electronic goods, and some chemicals. The merchandise trade deficit (MTD) widened to a slightly higher than expected 6-month high of $32.0 billion in July 2026 from $27.9 billion in the year-ago month, entirely led by non-oil items, while also exceeding the average monthly print of $29.0 billion seen in Q1 FY2027. While ICRA expects a marginal current account deficit (CAD) of ~0.2% of GDP in Q1 FY2027, we forecast the same to print at 0.9% of GDP in FY2027. This is likely to be comfortably financed, amid the Reserve Bank of India’s (RBI) measures to attract capital flows, leading to an accretion to reserves in the fiscal.

• MTD spiked to 6-month high of $32 billion in July 2026: India’s merchandise exports rose by a steep 19.6% YoY to $44.2 billion in July 2026, amid a ~68% surge in oil exports (owing to higher prices and volumes). Merchandise imports rose by a slightly lower, albeit elevated 17.5% YoY to $76.2 billion in July 2026, boosted by high commodity prices, and led by select items such as crude petroleum, electronics, fertilisers and chemicals which accounted for nearly ~78% of the total increase in imports in the month.
• Exports and imports saw healthy growth in 4M FY2027, amid elevated commodity prices:
• Merchandise exports expanded by a sharp 17.0% YoY in 4M FY2027, with oil, engineering and electronic goods accounting for as much as 84% of the absolute YoY rise in shipments. On the other hand, merchandise imports rose by a slightly higher 19.3% YoY in 4M FY2027, led by oil, gold, fertilisers, electronic goods and machinery, which accounted for ~85% of the total YoY increase during this period.