India’s September trade gap narrows sharply as imports fall

India’s September trade deficit narrowed more than expected, as imports fell sharper than exports despite elevated crude oil prices.

The gap between exports and imports stood at $19.37 billion, the lowest in five months, according to the data released by the trade ministry Friday. The reading is lower than a deficit of $24.16 billion in August and a $23.2 billion gap forecast by economists in a Bloomberg survey. 

Exports fell 2.6% from a year earlier to $34.47 billion in September, while imports plunged to $53.84 billion, down 15%. 

“Growth in some markets has made up for decline in others and has kept our trade deficit somewhat low,” Commerce Secretary Sunil Barthwal told reporters in New Delhi. India’s exports have stood steady despite global challenges, he said.  

An improvement in local production capacity and softening prices of some commodities, such as edible oil has also helped lower the nation’s import bill, Barthwal said. 

A rise in crude prices, however, doesn’t bode well for India, the world’s third-largest consumer of oil. India’s crude oil basket has averaged $89.1 a barrel in October, according to federal oil ministry data. The prices so far are up 19% compared with average $74.93 per barrel in June. The Indian rupee is also hovering near record lows for the past month.

“Despite lower than expected September trade print, the second quarter will see substantial widening of current account deficit led by sequential worsening of trade balance, led by higher oil and higher core imports,” Madhavi Arora, lead economist, Emkay Global Financial Service, said. 

Services exports have been an outlier, growing at a healthy pace during the current fiscal year, mostly driven by software and business services. Exports from the sector were estimated at $29.37 billion last month.