India's May trade gap narrows as exports rise; U.S. trade talks in focus

NEW DELHI: India’s merchandise trade deficit narrowed marginally in May as higher exports offset part of the import bill, while firms navigated volatile energy prices, Middle East disruptions and ongoing trade negotiations with the United States.

The merchandise trade deficit narrowed to $28.21 billion in May from $28.38 billion in April, below economists’ forecast of $28.72 billion, a Reuters poll showed.

Merchandise exports rose to $45.2 billion in May from $43.56 billion in the previous month, government data showed on Monday, while imports rose to $73.41 billion against a six-month high of $71.94 billion in April.

The data underscores pressure on India to sustain exports and contain import costs as it seeks greater U.S. market access, with April-May goods exports nearly flat at $17.29 billion versus $17.21 billion a year earlier.

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Trade Secretary Rajesh Agrawal said U.S. Trade Representative Jamieson Greer is due to visit India from June 23 to 24 for further talks on an interim trade agreement.

“Discussions with USTR will be centred around giving final touches to our interim deal,” Agrawal told reporters, adding that New Delhi would seek clear answers on the USTR’s proposed new tariffs under a Section 301 probe while finalising the pact.

New Delhi is seeking a trade deal with the United States that would give its exports preferential tariff access, though talks have been complicated by U.S. investigations into alleged overcapacity in sectors such as textiles and steel.

Trade is expected to feature in discussions between U.S. President Donald Trump and Indian Prime Minister Narendra Modi on the sidelines of this week’s summit in France, though a deal is not expected to be finalised.

Relations have been strained by U.S. tariffs on Indian goods and Trump’s repeated claims, denied by New Delhi, that he helped end India’s conflict with Pakistan last year.

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Sentiment has improved in recent weeks with Trade Minister Piyush Goyal saying earlier this month that the first tranche of a bilateral trade agreement could be concluded by mid-July.

US-Iran pact seen easing pressure

India’s trade numbers come as U.S. and Iranian officials said they agreed on a framework to end their war, halt the U.S. blockade of Iran and reopen the Strait of Hormuz, a preliminary pact that sent oil prices lower.

India imports over 80% of its crude and about 60% of its cooking gas, much of it from the Middle East, so the expected reopening of the Strait of Hormuz could ease its import bill and exporters’ freight, insurance and energy costs.

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Agrawal said easing tensions and reopening the shipping route would help reduce cost pressures for Indian exporters and importers.

The government estimated services exports at $36.76 billion in May and services imports at $19.06 billion, leading to an estimated services trade surplus of $17.7 billion.

Ashwin Chandran, chairman of the Confederation of Indian Textile Industry, called the U.S.-Iran announcement “a shot in the arm” for India’s textile and apparel sector, saying it would ease supply chain cost pressures and support India’s export goals.