Quote on Trade by Aditi Nayar, Chief Economist, ICRA Ltd
Below the Quote on Trade by Aditi Nayar, Chief Economist, ICRA Ltd
"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 trade value. Merchandise imports touched the highest level in 9 months, boosted by a 20%-plus expansion in items like coal, fertilisers, electronic goods, and chemical materials and products.
The merchandise trade deficit 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, while also exceeding the average monthly print of $29.0 billion seen in Q1 FY2027. The sequential widening in the merchandise trade deficit in July 2026 relative to June 2026, was narrower than the increase in gold imports between these two months.
While we expect a marginal CAD of ~0.2% of GDP in Q1 FY2027, the same is expected to widen sharply to ~2.0% of GDP in Q2 FY2027. Overall, we expect the CAD to print at a benign 0.9% of GDP in FY2027, which is likely to be comfortably financed, amid the RBI’s measures to attract capital flows, leading to an accretion to reserves in the fiscal."
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