Business & Policy | Import/Export

Moderation In India’s Trade Deficit Could Be Transitory In Nature

Published: February 21, 2023

According to credit rating agency Acuite Ratings & Research, the decrease in India’s trade deficit in January may only be temporary due to reasons such as the bottoming out of commodity prices, global inflation, and the suspension of a cargo port in Turkey.

In a report, Acuite Ratings stated that the trade deficit would remain at $106 billion, or 3.1% of GDP, for FY23, but added that there might be some relief in the form of increased reliance on Russia for oil imports and re-exports, an improvement in IT/ITeS service exports, and a slowing of domestic demand as a result of monetary policy measures. The research claims that the closure of one of Turkey’s major container ports could have a little effect. the fallout from the catastrophic earthquake on February 6.

Yarns, Dyes, and Gems & Jewellery could have negative export growth in February and March 2023, according to the Global Trade Research Initiative (Turkey accounted for 2.2% of India’s exports in CY22).In January-23, India’s merchandise trade deficit decreased to $17.7 billion from $22.1 billion in December-22, a 12-month low. While both exports and imports moderated sequentially in the month, the steeper decline in imports as opposed to exports was the major driver of the trade deficit’s notable decrease.

Exports of goods fell to a 3-month low of $32.9 billion in January from $38.0 billion in December 22 (revised up from $34.5 billion). On an annualised basis, this was the second month in a row. exports are contracting at a rate of 6.6%, up from 3.1% on December 22, according to Acuite Ratings.According to the data, merchandise imports decreased to $50.7 billion in January 23 from $60.2 billion in December 22 (revised up from $58.2 billion). This was the lowest level in 17 months.

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