India’s merchandise exports jumped to a record high of $45.2 billion in May 2026, 18% higher than in May last year, according to official data. However, despite this, India’s overall trade deficit widened to $10.5 billion due to a sharper growth in imports of both goods and services.

The data released by the Ministry of Commerce and Industry shows that India’s merchandise exports rose in May 2026, due to higher shipments to Singapore, China, the U.K., Tanzania, Bangladesh, Germany, and South Africa, among others. 

This increase was also relatively broad-based in terms of sectors, with both petroleum and several non-petroleum sectors seeing strong growth in exports in May 2026.

Export high

India’s total merchandise exports rose to $45.2 billion in May 2026 from $38.3 billion in May last year. Services exports rose 13.2% during the same period, to $36.8 billion in May 2026.

Within merchandise exports, the electronic goods sector saw exports growing 11.6% to $5.1 billion in May 2026. The organic and inorganic chemicals sector similarly saw exports grow by 12.7% to $2.7 billion during the same period.

Notably, the engineering goods category saw exports jumping 24.5% in May 2026 to $12.3 billion. The gems and jewellery sector, too, saw a growth in exports of 6.7% to $2.5 billion in May 2026.

Overall, the data shows India’s non-petroleum exports grew 10.5% to $70.7 billion in the first two months (April-May) of this financial year.  

Imports grow faster

However, despite this historic high in terms of merchandise exports, India’s trade deficit widened to $10.5 billion in May 2026 from $6.8 billion in May last year due to imports rising even faster than exports. 

India’s merchandise imports jumped 22.1% to $73.4 billion in May 2026. As a result, the merchandise trade deficit stood at $28.2 billion in May this year, 25% higher than in May 2025.

Services imports, too, grew 14.1% in May 2026 to $19.1 billion. 

The last few days have shown just what a roller coaster of a ride India’s economic data can take. Last Friday’s robust Q2 GDP growth, a six-quarter high of 8.2%, lifted the government’s mood and brought cheer to its supporters. The relatively low nominal growth rate and grade by the IMF did little to dampen this feeling. However, the latest data on the Index of Industrial Production (IIP) and, to an extent, the manufacturing PMI are likely to do more in that regard. The IIP’s growth in October 2025 was just 0.4%, a 14-month low. While the GDP data for the July-September quarter showed the manufacturing sector growing 9.1%, the IIP showed the sector had slowed to a 14-month low of 1.8% in October. One of the possible reasons for this is that the GDP growth rate was boosted by a low base, since the sector had grown just 2.2% in the July-September 2024 quarter. The other, more troubling reason, is the impact of the U.S.’s tariffs. Merchandise exports grew in September, the first full month of 50% tariffs, as earlier orders were being fulfilled. They then contracted nearly 12% in October as the tariffs began to weigh on new order decisions. The PMI data, too, showed that the score for India’s manufacturing sector stood at a nine-month low of 56.6 in November. The report specifically mentioned that new export orders rose at their slowest pace in over a year, another sign that the U.S.’s tariffs were hurting.

While subdued exports likely weighed on the manufacturing sector, the change in weather towards winter and prolonged rains pulled down the electricity and mining sectors, respectively. As a result, the primary goods sector contracted in October. The GDP data had shown that investment had grown by a reasonably strong 7.3% in Q2. However, the IIP data suggest this could have slowed in the beginning of Q3 with the capital goods sector growing at a 14-month low of 2.4%. The IIP data also have some concerning news regarding household consumption. The GDP data showed that Private Final Consumption Expenditure grew at nearly 8% in Q2. However, the IIP showed that the consumer durables and non-durables sectors contracted in October, in aggregate their worst performance in two years. This was the first full month of data following the GST rate rationalisation. GST revenue of ₹1.7 lakh crore in November, reflecting economic activity in October, also shows that demand did not come rushing in as fast as the government would have liked. Taken together, multiple initial metrics are indicating that Q3 is not likely to be a cheerful quarter for the economy.