Indias trade deficit may stabilise around current levels; Oil prices key risk: Nuvama

While the trade deficit has narrowed, it could stabilise around current levels with oil prices remaining the key monitorable, the report said.

The brokerage further said export and import momentum is likely to remain firm in the near term, partly driven by higher prices. It added that, strong FCNR inflows provide a cushion, limiting near-term pressure on the INR.

The narrowing in the trade deficit was led by a USD 1.5 billion improvement in the oil deficit to USD 9.9 billion and a USD 1.3 billion decline in the gold and precious metals deficit as imports of both commodities fell.

The core trade deficit, excluding oil and gold, also narrowed by USD 2.3 billion to USD 15 billion, but remained elevated at near-record levels, the report said. The improvement was broad-based, with trade balances improving across chemicals, agriculture, electronics and engineering goods.

Goods exports grew 26.1 per cent year-on-year in August, accelerating from 19.6 per cent in July. On a trend basis, non-oil export growth rose to 17 per cent from 14 per cent, driven by electronics exports, which jumped to 51 per cent from 27 per cent.

However, the report cautioned that the sharp rise in electronics exports appears partly price-led, coinciding with higher chip prices. Excluding electronics, non-oil export growth remained broadly stable at 12 per cent on a trend basis.

On the import side, goods import growth moderated to 14 per cent in August from 17.5 per cent in July. However, core import growth on a trend basis rose to 24 per cent from 21 per cent, with electronics, engineering goods and ores showing strong growth.

Going ahead, the pace of import demand and the performance of non-oil exports will remain important for the trade balance, while the elevated core deficit remains a key area to watch. (ANI)