Breaking a three-month streak of positive growth, India’s goods exports contracted 1.5% in July to $33.98 billion, the lowest in eight months, even as the import bill rose 7.5% to $57.5 billion, widening the trade deficit by a sharp 23.7% in the month to $23.5 billion.

Sequentially, exports dropped 3.5% from June, while imports grew 2.3%, leading to an almost 12% spike in the merchandise trade deficit over the previous month’s $21 billion gap. While the decline in exports was led by petroleum products, whose outbound shipments’ value slumped 22.2% from last July to $5.2 billion, the import bill spike was aided by a 17.4% rise in oil imports that hit $13.8 billion, thanks partly to higher prices.

Gold imports fell 10.7% to $3.13 billion, but silver imports continued to raise eyebrows, rising over 439% to nearly $650 million. Higher imports of ‘non-oil, non-gold’ items also continued to fuel the trade deficit with consumer goods like electronics growing 11.5%., pulses up 43% and vegetable oils was 14.5% up.

Commerce Secretary Sunil Barthwal was sanguine about the blip in exports and exuded confidence that India will surpass last year’s record export tally of about $778 billion in 2024-25. “Merchandise exports may see ups and downs, but they are still 4.2% so far this year and services exports are robust,” he stressed, noting that the geopolitical situation remains tricky with fresh developments and disruptions surfacing almost every other day.

Exporters also flagged the continuous international trade disruptions and a sharp drop in commodity prices for falling export values. Federation of Indian Exporters’ Organisations chief Ashwani Kumar said that some exporters have also diverted goods to the domestic market as export margins have been cramped by a sharp rise in international freight.

“Among the industry’s major headwinds are high sea freight rates, protectionist measures from major export partners, and weak demand in some key markets,” said EEPC India chairman Arun Kumar Garodia. A further escalation of tensions in West Asia and the political unrest in Bangladesh also pose risks, he noted. Aditi Nayar, chief economist at ICRA said the lower duties on gold imports announced in the Union Budget may also raise the value of gold imports in the next few months.