India hits fiscal targets and sees export surge, but Gulf crisis squeezes fuel shipments

India’s macroeconomic engines are humming along, with factory output and exports holding their ground even as the ongoing Gulf energy shock casts a long shadow over the nation's import bill, subsidy burden, and trade balance.

Factory output beats expectations

India’s industrial output expanded 4.9% y-o-y in April, beating the 3.9% expected by economists polled by Reuters. Manufacturing led the print with 6.2% growth, supported by a 16% rise in capital goods output. Consumer durables grew 4.3%, consumer non-durables rose 2.8%, and electricity generation increased 4.9%, while mining contracted 5.1%.

Fiscal deficit lands on target

Closing the books: India’s FY 2026 (ended on 31 March) fiscal deficit came in at INR 15.19 tn (USD 159.9 bn), or 4.4% of GDP, in line with the government's revised estimate. Net tax receipts rose to INR 33 tn, and non-tax revenue increased to INR 6.8 tn.

Spending cuts: The government met the deficit target partly by cutting spending. Total expenditure was around INR 596.91 bn below the revised estimate, Business Standard reports. Revenue spending was cut by INR 266.36 bn, while capital expenditure was reduced by INR 330.55 bn.

The new fiscal year opened with a heavier run rate. April’s fiscal deficit reached 21.4% of the full-year target, compared with 11.9% in the same month last year. Economists flagged risks from higher fertilizer and LPG subsidies, lower excise-duty collections, corporate tax shortfalls, and weaker dividends from oil marketing companies.

Exports surge

Exports grew in double digits during April and May, though full May trade data is due on 15 June. April exports rose 13.78% to USD 43.56 bn, the highest monthly outbound shipment value in more than four years. The trade deficit widened to USD 28.38 bn as imports also rose.

Fuel exports drag: India’s outbound fuel shipments fell sharply in May as refiners kept more supply at home during the Iran war shock, Bloomberg reports, citing Kpler data. Shipments of diesel, gasoline, and jet fuel averaged about 878k bbl / d in May, down 31% y-o-y, as refinery maintenance, a gasoline export tax and disruptions to incoming supplies reduced exportable volumes.

LPG priority: India had imported about 90% of its LPG from the Middle East before the war, making cooking-gas supply a policy priority after Hormuz flows were disrupted. Refiners raised LPG output to a record 52k tons / d in May, 50% higher y-o-y, but that left fewer barrels available for gasoline and diesel exports.

The export push is now more closely tied to trade negotiations. India is targeting USD 1 tn in exports this year and USD 2 tn over the next five years, according to Commerce and Industry Minister Piyush Goyal.