India's merchandise trade deficit widened to $28.4 billion in April 2026, compared with $27 billion in April 2025 and $20.7 billion in March 2026, according to an analysis by HDFC Bank. The expansion came as import growth outpaced export growth.
Import Surge Driven by Gold and Core Goods
After a decline in March due to lower crude oil and gold purchases, imports rebounded in April, rising 10% year-on-year. Gold imports nearly doubled compared to March and surged 82% year-on-year. Higher core imports, including electronics, also contributed. The oil import bill reached $18.6 billion, up from an average of $13 billion in Q4 FY26, though volumes dropped 47% year-on-year due to disruptions from the Strait of Hormuz closure.
Oil Prices and Russian Crude
The Indian crude basket remained elevated at $114 per barrel. To secure supplies amid Strait of Hormuz restrictions, India increased purchases of Russian Urals crude after the temporary easing of US sanctions. Higher oil prices boosted petroleum exports by 34% year-on-year, keeping the net oil import bill at around $9 billion.
Export Performance
Overall merchandise exports rose 13.8% year-on-year in April 2026, supported by petroleum exports. Non-oil exports grew 9%, led by electronics and engineering goods. However, trade with West Asia weakened due to the conflict and Strait of Hormuz closure. Some shipments were rerouted via Singapore, replacing routes through the UAE.
Shifts in Trade Partners
Imports from Saudi Arabia rose 30.3%, while those from the UAE, Qatar, Kuwait, and Iraq dropped sharply by 34.6%, 94%, 84.4%, and 97%, respectively. Exports to the US moderated, likely due to a high base from advance shipments in the previous year.
Services Sector Cushions the Blow
Services exports grew 13.4% year-on-year, while imports declined 1.5%. Net services exports increased to $20.6 billion from $15.9 billion a year earlier, narrowing the combined goods and services deficit to $7.8 billion from $11.2 billion.
Current Account Deficit Outlook
HDFC Bank estimates India's current account deficit for FY27 at 2.1% of GDP, assuming average crude oil prices of $85 per barrel. Risks include prolonged Strait of Hormuz closure and elevated crude prices around $111 per barrel. Measures to curb gold imports could provide relief; a 20% decline in gold import volumes could lower the deficit by 10 basis points of GDP. Higher oil export earnings may offset some pressure, keeping risks broadly balanced.
