Balance of Trade for September 2019

Lower import bills narrowed India's trade deficit to a seven-month low of USD 10.86 billion in September.

India's trade deficit narrowed to a seven-month low of USD 10.86 billion in September as imports witnessed a broad-based contraction of 13.9% YoY for the fourth straight month. The trade deficit stood at USD 13.45 billion in the last month. Furthermore, exports also continued to be in the negative zone for the third month in a row and contracted by 6.6% YoY in September. Declining imports and exports mirrors the economic slowdown at both the national and global level.

The contraction in imports, although broad-based, is mainly on account of a fall in inbound shipments of crude oil and gold. Crude oil recorded a negative growth of 18% YoY to USD 8.97 billion in September due to the softening of global crude oil prices. Gold, on the other hand, continued to fall and contracted by 50% YoY in September on account of a spike in the prices of precious metals. However, gold imports may revive going forward on account of festivities in India. Non-oil and non-gold imports contracted for the eleventh consecutive month, reflecting the weak domestic demand in the economy.

Exports contracted by 6.57% YoY to USD 26 billion in September as growth in major sectors, including the labour-intensive, remained weak and recorded negative growth. 22 out of 30 major commodities witnessed contraction as against 7 in the previous month.

While a narrowing trade deficit will bode well with India's current account deficit, it had come at the cost of slowing domestic demand in the economy. This will not augur well with India's battle to reverse its domestic slowdown.