A reach stacker moves a shipping container at the Jawaharlal Nehru Port, operated by Jawaharlal Nehru Port Trust (JNPT), in Navi Mumbai, Maharashtra, India. (Photographer: Dhiraj Singh/Bloomberg)

India Trade Deficit Narrows Sharply to Lowest in 17 Months

(Bloomberg) -- India’s trade deficit narrowed more than estimated in February from a month ago, as imports fell owing to a sharp drop in oil purchase cost.

The gap between exports and imports was $9.6 billion last month, compared with $14.7 billion in January, data released by the commerce ministry showed Friday. The deficit is narrower than the $13.7 billion median estimate in a Bloomberg survey of 19 economists.

  • Exports rose 2.4 percent from a year ago to $26.7 billion, compared with a 3.7 percent gain in January
  • Imports fell 5.4 percent to $36.3 billion after remaining flat the previous month
India Trade Deficit Narrows Sharply to Lowest in 17 Months

Key Insights

  • The narrowing of the trade gap comes amid a key gauge of global container shipping activity signaling a rebound in world trade. The weekly Harpex shipping index suggests that global trade started improving in late January, according to Torsten Slok, chief international economist at Deutsche Bank AG
  • “So far these modest improvements have not yet caused a rebound in the PMIs for Europe and China, but we are watching closely for signs of the slowdown in the rest of the world coming to an end,” Slok said in a note
  • That measure was robust for India. The Nikkei India Manufacturing purchasing managers index rose to 54.3 in January, the strongest reading in 14 months. It holds out hope for a sustainable recovery in exports going forward and help economic growth to rebound from a six-quarter low
  • Still, a sequential decline in exports growth rate, and a fall in imports is seen by some as signs of an economy slowing

What Economist Says

  • “This is extremely negative from a growth perspective,” said Rupa R. Nitsure, chief economist at L&T Finance Holdings in Mumbai. “It reflects continued weakness in overall economic activity as the deficit has shrunk entirely because of imports”

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  • That view will lend itself to growing calls for a back-to-back interest rate cut by the Reserve Bank of India when it reviews monetary policy next month. Governor Shaktikanta Das has already flagged the need to support growth
  • Oil imports fell 8.1 percent year-on-year to $9.38 billion in February from $11.24 billion in the previous month
  • Gold imports fell 10.8 percent year-on-year to $2.58 billion
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