India posts smallest trade gap in 13 months as imports fall

India’s goods trade deficit narrowed to a 13-month low in February as imports declined amid a demand slowdown in the economy. 

The gap between exports and imports fell for a fourth straight month to $17.43 billion in February, India’s Trade Secretary Sunil Barthwal said at a press conference Wednesday. That’s lower than the $19.2 billion gap seen by economists in a Bloomberg survey and compares with a reading of $17.74 billion in January. 

Exports fell 8.8% from a year earlier to $33.8 billion in February, while imports stood at $51.3 billion, down 8.2% — the biggest decline in more than two years. 

Demand is weakening at home and abroad as central banks continue with monetary tightening to deal with persistent price pressures. That is contributing to smaller overseas purchases despite the benefit of softening global commodity prices.

Robust services exports are providing some reprieve for policymakers and spurring hopes of a moderation in the current account deficit that widened to an all-time high in the July-September quarter. Services exports rose 36.9% to $29.2 billion in February.

“India’s services exports so far have remained a bright spot and will help in moderation in CAD this year, said Aditi Nayar, an economist at ICRA Ltd. “However, we remain watchful of impact and intensity of global headwinds going forward.”

Earlier this year, Citigroup Inc. slashed its CAD forecast for the current financial year ending March to 2.9% of gross domestic product, from 3.3% seen previously due to strong momentum in services exports.