India’s November trade gap narrowed as imports fell

India’s trade deficit narrowed in November from a record high the previous month, as imports fell after demand slowed following the festive season. 

The gap between exports and imports reduced to $20.58 billion in November, trade ministry data showed Friday. The reading is lower than a record $31.4 billion surge in October, and a $24.5 billion deficit forecast by economists in a Bloomberg survey. 

Exports fell 2.8% from a year earlier to $33.90 billion in November, while imports fell to $54.48 billion, down 4.3%. 

A smaller gap reflected moderation in the “festive and marriage season import demand for gold and consumer durable goods,” said Madhavi Arora, economist with Emkay Global Financial Services Ltd. Exports highlight “somewhat uneven external demand,” she said. 

Demand for consumer products and services usually moderates a little after the festive season culminates. India’s economy continues to expand at a faster pace than any other major nation despite surging inflation and high interest rates. 

An improvement in local production capacity and easing crude prices also helped the nation post a smaller trade gap. India’s basket of crude oil averaged $83.46 a barrel in November, its lowest since July. The prices have further fallen and were $75.10 as on Dec. 14, according to oil ministry data.

“Despite general global slowdown, interest rate regime not softening, and global conflict, India has done extremely well,” Commerce Secretary Sunil Barthwal told reporters in New Delhi.

India’s narrowing trade deficit will provide some comfort to policymakers and ease pressure on the local currency. The Indian rupee is headed for its biggest gain since March, down as much as 0.5% to 82.95 against the dollar. It will also help lower the current account gap after it widened more than expected in the June quarter. 

“Over the remainder of this fiscal year, we project the monthly trade deficit in a range of $20 billion to $25 billion,” said Aditi Nayar, economist with ICRA Ltd. Overall, the current account deficit for the fiscal year that ends in March could be in a range of 1.7%-1.8% of the gross domestic product, she said.

A delegation from India is in UK to finalize the awaited free trade agreement, talks on which are in their “last leg”, Barthwal said. The nation is also in talks with Oman for a trade pact, he added. 

Here are more details: 

• Gold imports rose 6.24% from a year ago, silver import jumped 254.75%
• Pulses 53.59%; Fruits and vegetables +50.17%
• Petroleum, crude and products fell 8.47%
• Electronic goods +10.06%
• India to see “minimal disruption” due to the ban on Russian diamonds by the Group of Seven countries, said Vipul Bansal, joint secretary, Ministry of Commerce
  • Gems and Jewelry contributed about 8.27% of India’s total exports in November

--With assistance from Ronojoy Mazumdar and Anup Roy.