By S. JHA
India’s Export Engines Re-Accelerate: What’s Behind the 18% Surge to a Six-Month High in May 2026
Mumbai, July 12, 2026 — India’s merchandise trade numbers just gave economy-watchers something to talk about. According to a “Chart of the Week” released by Baroda BNP Paribas Mutual Fund, exports jumped 18% year-on-year to touch $45.2 billion in May 2026 — the strongest monthly reading in six months — with the rally credited to a 55% surge in petroleum refining shipments and double-digit gains in engineering goods.
That headline number checks out against official trade data, and digging into the underlying figures tells a more layered story than a single growth chart can capture: one of currency-driven competitiveness, energy-price arithmetic, and a widening trade gap that comes along with the good news.
Government trade data confirms the scale of the move. Indian goods exports rose to $45.2 billion in May 2026, an 18% jump from a year earlier and a six-month high, according to Commerce and Industry Ministry figures reported by PTI. The gain followed a strong April, when merchandise exports had already climbed to $43.56 billion from $38.28 billion a year earlier — meaning May marked a second straight month of accelerating momentum rather than a one-off spike.
Cumulatively, merchandise exports rose 16.09% to $88.91 billion over April–May of fiscal year 2026–27, while combined goods-and-services exports for the same two months reached $162.69 billion, up close to 15% on the year.
What’s Actually Driving the Rally
The Baroda BNP Paribas chart singles out petroleum refining and engineering as the two engines, and the official breakdown backs that up almost line for line:
– Petroleum products exports surged roughly 55% year-on-year to $8.42 billion in May, per Ministry of Commerce data — the single biggest swing factor in the month’s export tally.
– Engineering goods climbed 24.48% to $12.31 billion, up from $9.89 billion a year earlier, making it the largest export category in dollar terms.
– Electronics exports rose 11.62% to $5.09 billion, continuing a steadier, less volatile climb.
– Organic and inorganic chemicals grew 12.71%, adding further breadth beyond the two headline sectors.
That breadth matters. As one trade analysis put it, the data suggests export growth is increasingly tied to industrial output across multiple categories rather than a narrow set of commodities — non-petroleum exports alone reached $70.74 billion over April–May, up 10.49% on the year.
Part of the export strength has a straightforward explanation: a weaker rupee. Reporting on the release noted that a decline of more than 10% in the domestic currency over the preceding twelve months had boosted Indian exporters’ price competitiveness abroad — a classic channel through which currency depreciation shows up in trade data, even as it raises the cost of imported inputs like crude oil.
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The Catch: A Widening Trade Deficit
The export rally didn’t come free. Imports grew even faster — up 20.6% year-on-year to $73.4 billion in May — leaving a merchandise trade deficit of $28.21 billion, only marginally narrower than April’s $28.38 billion (or $28.23 billion, per a slightly different Ministry figure) and still close to historically elevated levels. That’s noticeably below economists’ expectations, though: a Reuters poll had forecast a wider deficit of $28.72 billion.
The main culprit was energy. Oil imports jumped 53.8% to $22.67 billion as crude prices hovered near $100 a barrel during the month — meaning India’s own petroleum refining success (exports) was being funded in part by a much larger crude import bill on the other side of the ledger. Gold imports added further pressure, rising 34% on higher prices even as volumes were curbed by a customs duty hike imposed in mid-May.
ICRA’s principal economist Rahul Agrawal, per media reports, attributed the deficit largely to this higher net oil import bill driven by the spike in global energy prices — a reminder that India’s trade math remains heavily hostage to crude oil, which still accounts for over 80% of the country’s oil consumption via imports.
Geopolitics in the Background
Two live geopolitical threads sit underneath these numbers. Commerce Secretary Rajesh Agrawal told reporters that Indian exports to West Asia had almost recovered to year-ago levels despite regional disruptions, and separately flagged that a developing peace arrangement between the US and Iran — one that could reopen the Strait of Hormuz — might ease shipping and energy costs for Indian businesses going forward, since India sources the bulk of its crude and roughly 60% of its cooking gas from the region.
On the trade-policy front, Agrawal also confirmed that discussions with the US were being finalized around an interim bilateral trade agreement, with U.S. Trade Representative Jamieson Greer visiting India in late June for follow-up talks — a deal India hopes will secure preferential tariff access to the American market, its largest single export destination.
A Note on Sectors Left Behind
Not every category shared in the rally. Plain gold jewellery exports fell sharply — down over 40% year-on-year to $635.95 million over April–May — a decline the Gem and Jewellery Export Promotion Council linked to tighter gold import curbs limiting supply for export manufacturing. Tea, tobacco, spices, cashew, marine products, leather and textiles also posted negative growth for the month, a reminder that the export “engine” is running on a handful of large, capital-intensive sectors rather than firing on all cylinders.
The Baroda BNP Paribas chart’s framing — a “structural trade expansion” — is a reasonable read of the headline trend: exports have now strung together two consecutive months of double-digit growth, led by petroleum refining and engineering, categories that reflect genuine industrial capacity rather than just favourable base effects.
But the fuller picture, drawn from official trade data and independent reporting, shows this strength arriving alongside a still-wide trade deficit, a currency doing a lot of the competitiveness work, and an oil-price dependency that cuts both ways — boosting refined product exports while inflating the crude import bill that funds them.
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