New Delhi [India], August 11 (ANI): The government said India's merchandise trade deficit remains broadly in line with its recent average and does not reflect a structural weakness in the external sector, while it continues to strengthen domestic capacity in strategic sectors to reduce import dependence, Jitin Prasada, Minister of State for Commerce and Industry said in a written reply in Lok Sabha on Tuesday.

The merchandise trade deficit stood at USD 30.4 billion in June 2026, a five-month high, but was marginally above the 12-month average of USD 29.3 billion, the ministry said, adding that a single month's deficit does not by itself reflect overall trade performance.

The minister said the higher deficit largely reflects imports required for a rapidly growing economy, including crude oil, electronic goods, machinery and capital goods, gold, fertilisers and other intermediate inputs needed for energy security, manufacturing, infrastructure and industrial expansion.

Petroleum products accounted for about 26 per cent of India's total imports in FY 2025-26, while machinery and capital goods and electronic goods together accounted for nearly one-fourth. Gold, precious stones and gems accounted for about 14 per cent of total imports, the ministry said.

'Accordingly, the increase in the merchandise trade deficit largely reflects higher imports of essential and productive goods required for economic growth, industrialisation and export competitiveness, rather than any structural weakness in India's external sector,' it said.

The ministry said India's current account deficit moderated to 0.6 per cent of GDP in FY 2025-26, while foreign exchange reserves stood at USD 671.6 billion in June 2026. Strong services trade surplus, remittance inflows and stable capital flows also continued to support the balance of payments, it said.

Going forward, the government said it is focusing on reducing strategic import dependence by strengthening domestic capacity in electronics, semiconductors, renewable energy, critical minerals and advanced manufacturing.

It is using measures including Production Linked Incentive schemes, PM Gati Shakti, the National Logistics Policy and the National Industrial Corridor Development Programme, along with supply-chain resilience initiatives and promotion of technology adoption and innovation.

The government is also diversifying sources of crude oil, fertilisers and other strategic commodities, while monitoring critical imports and using measures such as trade remedies, Quality Control Orders, Rules of Origin enforcement and tariff rationalisation.

The ministry said these efforts are aimed at reducing external vulnerabilities and building a resilient and globally competitive economy. (ANI)