India's trade deficit moderation could be transitory: Acuite Ratings

21 Feb '23

2 min read

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India’s trade deficit moderation in January this year could be transitory and factors like bottoming of commodity prices, global inflation and suspension of a container port in Turkey could pressure the trade deficit, according to Acuite Ratings and Research, which recently maintained that the trade deficit for fiscal 2022-23 will be $106 billion, or 3.1 per cent of the gross domestic product (GDP).

Cushion could be in the form of increased dependence on Russia for oil imports and re-exports, improvement in information technology (IT) and IT-enabled service exports and slowing of domestic demand due to monetary policy measures, the credit rating agency said in a note.

Yarns and dyes could see negative export growth in February-March this year, it said.

The country’s merchandise trade deficit moderated to a 12-month low in January to $17.7 billion compared to $22.1 billion in December last year. While both exports and imports eased sequentially in the month, the sharper drop in imports as against exports drove the significant moderation in the trade deficit.

Merchandise exports fell to a three-month low of $32.9 billion in January from $38 billion in December last year. On annualised basis, this marked the second consecutive month of contraction in exports, at a pace of 6.6 per cent compared to 3.1 per cent in December, said Acuite Ratings.

The credit rating agency added that India’s merchandise imports moderated to a 17-month low of $50.7 billion in January compared to $60.2 billion in December last year.

Fibre2Fashion News Desk (DS)

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