India's trade deficit widens as defence output hits record and wholesale inflation spikes

India’s trade gap expanded in May 2026 despite strong export growth. Merchandise exports reached a record US$ 45.2 billion, while imports rose to US$ 73.4 billion, pushing the overall deficit to about US$ 10.5 billion year‑on‑year (data from the Ministry of Commerce). A separate government release noted the deficit at US$ 28.2 billion, reflecting the combined merchandise and services balance.

Defence production surged 15.6% to a historic Rs 1.78 lakh crore in FY 2026, with the private sector’s share rising to roughly 24% and contributing about Rs 42 000 crore. The increase underpins India’s push for self‑reliance in defence manufacturing and supported record defence exports of Rs 38 424 crore.

The government also raised the windfall export tax on diesel to Rs 14 per litre and on aviation turbine fuel to Rs 12.5 per litre, leaving the petrol export levy unchanged. The move aims to safeguard domestic fuel availability amid high global crude prices.

Wholesale inflation accelerated to 9.68% in May, driven by a 30% rise in fuel and power prices and higher manufacturing costs. A new Wholesale Price Index series with a 2022‑23 base year was launched, alongside Producer Price Index trackers for output, input and services, aligning India’s price statistics with international best practices.