Merchandise Trade Deficit Surges Just As India Becomes EU’s Largest Refined Oil Exporter 

Officials are convinced that the increase in merchandise growth in India amidst the persisting geopolitical upheavals indicates an economy that is in recovery in the post-pandemic years. 

India’s merchandise trade deficit exceeded expectations by increasing to US $27.14 billion in October. Merchandise trade deficit is when the country’s imports are more than its exports. A rise in imports, despite a year-on-year rise in exports, has resulted in this increase.  Based on the US $20.78 billion in September, economists had predicted that the October figures would be approximately US $22 billion.  

Both imports and exports are increasing, and Trade Secretary Sunil Barthwal is assured that export performance will remain strong and expand. Exports are expected to rise above US $800 billion by March 2025. According to Barthwal, the government’s strategy is to export selected goods, with a particular focus on electronic and electric goods which are doing well in the international markets. Engineering goods were valued at US $11.26 billion in October and industry experts are hopeful that with Trump’s recent election victory, India-US bilateral trade will witness further improvement.  

Officials are convinced that the increase in merchandise growth amidst the persisting geopolitical upheavals indicates an economy that is in recovery in the post-pandemic years. Government data suggests that while there was a 13.4% increase in exports, imports increased by 20%. However, the 2024 data indicates that the trade gap was reduced by US $3.29 billion when compared to last year. 

The October reports state that the primary drivers of merchandise growth were engineering goods (up 39.7%), electronic goods (up 45.69%), and organic and inorganic chemicals (up 27.35%). The Ministry of Commerce and Industry has predicted that service exports will increase by 21.3% year-on-year while imports are set to drop by 20.8%. 

The data also reveals that gold imports rose to US $7.13 billion from US $4.39 billion in the past month alone and crude oil imports rose to US $18.2 billion from US $12.5 billion. This data was released merely days after it was reported that India’s exports of diesel fuel to the European Union (EU) recorded a 58% increase in the first three quarters of 2024. 

A bulk of this oil is being imported from Russia and is being refined in India. India is certainly benefitting from the price cap instated by the EU countries on Russian crude oil, in retaliation to Russia’s attack on Ukraine. Before the invasion, India was purchasing less than one percent of Russia’s oil, to presently becoming its second-largest importer. 

The increase was mainly attributed to the discounted prices of Russian oil due to the price cap and the rest of Europe imposing an embargo on the Kremlin. With these European countries locking horns with one another, India has been able to capitalise on this situation on two fronts. It not only increased crude oil imports from Russia but also used its domestic refineries to become the largest exporter of oil to EU countries. While approximately 1,54,000 barrels per day were being exported to Europe from India before the 2022 invasion of Ukraine, the figure has since doubled. 

While India is more than 85% reliant on imports to meet its crude oil demands, using the refining loophole, it has managed to become the primary exporter of refined oil and petroleum products to the EU countries. According to reports, in October China purchased 47% of Russia’s crude oil exports, while India was in second position purchasing 37%, and Turkey and the EU nations sourced their oil needs by purchasing merely 6% of crude oil from Moscow. 

To improve the country’s export capabilities, India has been actively engaging in multilateral forums, so that it can forge favourable trade and investment deals with various countries. The recent BRICS summit and Prime Minister Modi’s support to recently elected US President Trump indicate the country’s vision to enhance its trade relations and economic cooperation in the international system.