India’s trade deficit narrows in November on falling imports

India’s trade deficit narrowed last month as imports outpaced a drop in exports, amid lingering weakness in demand in an economy that’s entered a recession.

The gap between outbound and inbound shipments in November was $9.96 billion, compared with $12.75 billion a year ago, according to preliminary data released by the trade ministry Wednesday. Imports dropped 13.3% to $33.39 billion, compared with a 9.1% fall in exports.

Key Insights

• The latest data disappoints after other high frequency indicators from purchasing managers’ surveys to tax collections signaled activity picking up at a faster clip
• A recovery in merchandise trade, which accounts for about 31% of India’s gross domestic product, is crucial for any improvement in the economy that entered a technical recession last quarter
• The fall in inbound shipments was primarily led by petroleum products, with oil imports declining 43.4% to $6.27 billion. Machinery imports fell 13.4% and transport equipment dropped 19.6%
• “The sustained contraction in categories like machinery and transport equipment suggest weak investment demand,” Sonal Varma and Aurodeep Nandi, economists at Nomura Holdings Inc., wrote in a report to clients