India: Narrower trade gap – ING

Prakash Sakpal, Economist at ING, notes that India’s external trade deficit surprisingly narrowed to $14.0 billion in September from $17.4 billion in August, despite a sharp slowdown in export growth to -2.1% YoY, the first negative print since March, from 19.2% growth in August.

Key Quotes

“But import growth also slowed to 10.5% from 25.4% on a broad-based slowdown in both oil and non-oil imports.”

“Oil imports have been falling on a month-on-month basis since July and the year-on-year growth rate has nearly halved to 34% over the same period despite firmer global crude price inflation of over 40% through September. However, after the recent spike in oil prices above $80 per barrel and with elevated geopolitical risk in gulf countries (Iran, Saudi Arabia) we anticipate no lasting relief on the trade deficit front.”

“The cumulative deficit of $94 billion in the first half of FY2018-19 was still $20.7 billion wider on the year, supporting our view of a widening of the current account deficit to 2.6% of GDP in the current financial year from 1.9% in the last.”