India's merchandise exports surged 18 per cent year-on-year to $45.2 billion in May 2026, driven by a 24 per cent jump in engineering goods exports, according to data released by the Ministry of Commerce. However, the country's trade deficit widened to $28.21 billion as crude oil imports — despite lower global prices — and gold purchases continued to rise.
Export Growth by Sector
| Sector | May 2026 Exports | YoY Growth |
|---|---|---|
| Engineering goods | $12.31 billion | +24% |
| Electronics | $3.85 billion | +22% |
| Pharmaceuticals | $2.40 billion | +14% |
| Petroleum products | $6.80 billion | +8% |
| Textiles and garments | $3.10 billion | +12% |
| Agricultural products | $4.20 billion | +16% |
Trade Deficit Analysis
The trade deficit of $28.21 billion in May compares with $24.50 billion in the same month last year. Key drivers of the widening deficit include higher gold imports (up 35 per cent to $6.2 billion) and machinery imports for infrastructure projects. However, the deficit is partially offset by strong services exports, which grew 12 per cent to $28 billion.
For the April-May period of FY27, cumulative merchandise exports reached $88.91 billion, marking a 16.09 per cent growth over the corresponding period last year.
What This Means for the Indian Economy
The strong export performance is encouraging for India's current account balance and rupee stability. The Engineering Export Promotion Council (EEPC) attributed the engineering goods surge to increased demand from the US, Europe, and Southeast Asia for auto components, machinery, and industrial equipment.
India's PLI schemes in electronics and automotive sectors are beginning to show results, with electronics exports crossing the $3.8 billion mark for the first time in a single month. The government's focus on free trade agreements with the UK, EU, and EFTA is expected to further boost export competitiveness.
Challenges Ahead
Despite the strong headline numbers, concerns remain. The widening trade deficit could pressure the rupee, and the government's decision to hike diesel and ATF export levies from June 16 may impact petroleum product exports going forward. US Trade Representative Jamieson Greer's visit to New Delhi on June 23-24 for bilateral trade agreement talks will be closely watched.
