India’s merchandise trade deficit narrowed to a 12-month low of USD 17.7 bn in Jan-23 from USD 22.1 bn in Dec-22.
Download ReportQuantEco Research || Jan-23 Merchandise Trade - Deficit moderation a blip?
India’s merchandise trade deficit narrowed to a 12-month low of USD 17.7 bn in Jan-23 from USD 22.1 bn in Dec-22. While both exports and imports contracted sequentially, the relatively larger fall in imports had a moderating influence on overall trade deficit. While China’s New Year Holidays (the first unrestricted holidays after 3-years of COVID restrictions) could have had a temporary impact on trade data, other factors like commodity prices, pre-Budget positioning, and rollback of certain export duties along with improvement in domestic production for certain key items also appear to have played a role. We expect pressure on trade deficit to re-appear in the coming months as the impact of some of the ad hoc factors tapers. As such, on net basis, we maintain our current account deficit forecast at 3.1% of GDP (USD 106 bn) in FY23 and 2.5% of GDP (USD 90 bn) in FY24. However, recent data revisions give us the impression that there is an emerging likelihood of a narrower deficit.