India’s merchandise trade deficit widened to a record high of USD 37.8 bn in Nov-24 from USD 27.1 bn in Oct-24.
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The deterioration was predominantly led by gems & jewellery trade deficit that rose to a record high of USD 14.4 bn. While we can expect both crude oil (price effect) as well as gems and jewellery imports (volume effect as demand normalizes) to ease in the coming months, Nov-24 data does not exude comfort. The sharp widening of trade deficit in Nov-24, catapults the FYTD (Apr-Nov deficit at USD 202.4 bn) run rate up 18% on annualized basis, compared to a more modest 10% till Oct-24. More so, this at a time when Rupee has depreciated swiftly by almost 1% since beginning Nov-24, could add further pressure on the domestic currency and enter a negative feedback loop. Despite the sizable upside in Nov-24 trade deficit, we continue to maintain our current account deficit forecast of 1.2% of GDP in FY25 vs. 0.7% in FY24, given the strength in services exports.