India's Trade Deficit Narrows to $20.7 Billion in June 2025
India's Trade Deficit Shows Improvement
In June 2025, India's trade deficit decreased to $20.7 billion, down from $21.9 billion in May. According to a recent report by Union Bank of India (UBI), factors such as lower crude oil prices, reduced gold purchases, and strategic buying played significant roles in this reduction. Despite fluctuations in global commodity prices, India managed to maintain a favorable trade balance through its prudent strategies.
Relief in Oil Purchases: Russia and the USA as Reliable Partners
Crude oil prices softened in June, benefiting India. A temporary ceasefire between Israel and Iran, along with increased oil production from OPEC+ countries, helped lower India's oil purchasing costs. The price of Brent crude rose from $64.01 per barrel in May to $69.80 in June; however, the good availability of oil kept expenses from rising significantly. Energy analytics firm Vortexa reported that India imported 4.66 million barrels per day (mbpd) of oil in June, slightly down from 4.72 mbpd in May.
Strategic Changes in Oil Procurement
India has also adjusted its oil procurement strategy, with imports from Russia reaching a two-year high of 2-2.2 mbpd. Additionally, oil imports from the USA surged by 270% in the first four months of 2025. This strategic maneuver has reduced India's reliance on traditional Middle Eastern suppliers, particularly in high-risk areas like the Strait of Hormuz.
Decline in Petroleum Product Exports
However, there was a decline in petroleum product exports, which fell by 10% in June to 1.19 mbpd, down from 1.32 mbpd in May. Year-on-year, exports also decreased by 3.7%, hindering further improvement in the trade deficit.
Gold Imports Drop Amid Soaring Prices
Gold imports also saw a decline in June. Global gold prices reached $3,353 per ounce, marking a 5% increase from May and a 32% rise since the beginning of the year. High prices, stringent regulations, and reduced domestic demand contributed to the decrease in gold purchases. Preliminary data indicates that gold imports in May were 30.56 tons, down from 34.87 tons in April, with expectations of further declines in June.
Stable Coal Imports Amid Continued Demand
Coal imports increased slightly in June, with 16.59 million tons arriving from major ports, reflecting a 1.2% rise from the previous year but a 2.1% decrease from May. Thermal coal, which constitutes 70.2% of total imports, rose by 7.2% compared to last year, indicating strong demand from the power and industrial sectors. The government has implemented several significant measures to control the trade deficit, including:
Government Measures to Control Trade Deficit
- Imposing anti-dumping duties on four Chinese chemicals.
- Restricting imports of jute and woven fabrics from Bangladesh.
- Requesting a halt to iron ore pellet purchases from Oman due to complaints from Indian industries regarding Iranian-origin cargoes.
Future Price Trends Will Influence Trade Deficit
The UBI report clearly states that if global prices for oil and metals rise, India's import costs may increase. However, a decrease in global demand and sluggish exports could alleviate some of this pressure. The report concludes that future trends in commodity prices will determine the direction of India's trade deficit.