Trade deficit trend hopefully is likely to remain better in FY24-25

 India's goods trade deficit shrank to USD 20.58 billion in November 2023 from USD 22.1 billion in the same month the previous year, less than the USD 23.6 billion difference that the market had predicted.This number is significantly less than Oct 23 Trade deficit of US$31.46 billion which was the highest in the last ten quarters 

Exports decreased by 2.9% to USD 33.9 billion as a result of a number of circumstances, including the geopolitical environment, dangers including rising inflation, the recession in developed economies, the conflict between China and the US and Russia and Ukraine, and the conflict between Israel and Hamas in Gaza. Meanwhile, as imports of gold, oil, and electronics decreased, imports fell 4.4% to USD 54.5 billion. Additionally, from April to November of this fiscal year, imports fell by 8.7% to USD 445.2 billion while exports decreased by 6.5% to USD 278.8 billion.The following figure shows the trend of India's Exports and Imports for the past 5 years since 2018. There was a steep fall in both Imports and Exports during Covid period.

There was a peculiar aspect in Imports this month.Unlike in Oct 23 when Gold imports jumped by 95.4% YOY, this month Silver imports widened by 254.8% YoY!! Has Gold and Silver Imports indicate any correlation with RBI withdrawal of Rs2000 currency! Hoarders may know better!

In the next few months upto March 2024 the outlook looks like:

• Trade deficit is expected to narrow: The trade deficit, which refers to the difference between the value of imports and exports, is likely to narrow in the coming months compared to the same period last year. This is due to several reasons, including:

  • Easing global commodity prices: Prices of key commodities like crude oil and coal have cooled down in recent months, reducing India's import bill.
  • Festive season boost: The upcoming festive season in India typically leads to increased domestic demand for goods, potentially pushing up exports.
  • Government measures: The Indian government has implemented various measures to boost exports and curb non-essential imports, which could further contribute to a narrower trade deficit.

• Month-wise variations: The trade deficit might fluctuate month-on-month due to seasonal factors and specific trade deals. However, the overall trend is expected to be towards narrowing.

• Trade deficit outlook FY 2024-25:

  • Gradual improvement: The trade deficit is expected to gradually improve and narrow throughout FY 2024-25, potentially reaching lower levels compared to the current fiscal year. This improvement is supported by factors like:

    • Continued focus on exports: The government's push towards export-oriented policies and initiatives like Production Linked Incentive (PLI) schemes is likely to bear fruit in the coming year.
    • Domestic manufacturing growth: Increasing domestic manufacturing, particularly in sectors like electronics and pharmaceuticals, could help reduce dependence on imports and boost exports.
    • Geopolitical developments: Depending on how global geopolitical tensions evolve, there could be further opportunities for India to increase its trade with certain countries.

  • Challenges remain: Several challenges could hinder the improvement in the trade balance, such as:

    • Global economic slowdown: A potential global economic slowdown could dampen global demand for Indian exports.
    • Exchange rate fluctuations: Fluctuations in the rupee's exchange rate could impact the competitiveness of Indian exports.
    • Supply chain disruptions: Ongoing global supply chain disruptions could continue to pose challenges for both imports and exports.

  • After General Elections in India in May 24 ,the new incumbent Government is expected to follow the same progressive Trade policies.

  Overall, the outlook for India's trade balance is cautiously optimistic for the next four months and FY 2024-25. However, it's important to remember that the situation remains fluid and subject to various external and internal factors.

  
  
  

  It's also important to note that these are just forecasts, and the actual trade balance figures may differ. It's advisable to stay updated on the latest developments and economic reports for a more precise understanding of the evolving situation as Global Oil Price can spoil the forecast of improvement in Trade deficit!