India’s merchandise trade deficit increased to a 10-month high of USD 24.2 bn in Aug-23 from USD 20.7 bn in Jul-23.
Download ReportQuantEco Research || Aug-23 Merchandise Trade - Deficit jumps
While both exports and imports showed a sequential increase, the widening of the trade deficit was on account of a higher expansion in imports vis-à-vis exports. As much as 93% of the sequential increase in trade deficit was on account of Gems & Jewellery, Chemicals & Products, and Miscellaneous Items. Even though we maintain our FY24 current account deficit forecast of USD 53 bn (vs. USD 67 bn in FY23), we believe that the anticipated correction has got frontloaded on account of factors like surge in commodity prices, administrative interventions by the government to curb inflationary pressures, and dissipation of cheaper oil imports from Russia. As such, going forward, the cumulative trade deficit in H2 FY24 could widen vs. H1, thereby imparting an upside risk to our FY24 CAD estimate.