In a welcome sign for the Indian economy, the country’s trade deficit shrank to a three-month low in December 2023. This positive development was largely driven by a decline in global commodity prices, which led to a decrease in the value of imports.
Data released by the Commerce and Industry Ministry showed that the trade deficit, which represents the difference between the value of goods imported and exported, stood at $19.8 billion in December. This marked a significant improvement from the $23.14 billion deficit recorded in the same month of the previous year.
The improvement can be attributed to a two-pronged approach: a modest increase in exports and a notable fall in imports. Merchandise exports during the month edged up by 0.97% year-on-year to $38.45 billion, indicating some resilience in the face of global headwinds. Meanwhile, imports witnessed a more significant decline, shrinking by 4.85% to $58.25 billion.
The fall in imports can be largely attributed to the easing of global commodity prices, particularly crude oil, which witnessed a 22.77% drop in December compared to the same period a year ago. This translated into a reduction in the import bill for oil, India’s major import item.
While the narrowing of the trade deficit is a positive development, it’s important to note that exports growth remains tepid. Sustaining this positive trend will require continued efforts to boost export competitiveness and diversify export markets.
Analysts expressed cautious optimism about the December data, highlighting that it’s too early to declare a definitive trend reversal. However, they acknowledged that the easing of commodity prices provides a much-needed respite for the Indian economy, potentially alleviating pressure on the current account deficit and foreign exchange reserves.
The improvement in trade deficit could also have positive implications for macroeconomic stability and investor sentiment.
Last Updated on: Tuesday, January 16, 2024 9:05 pm by Navaneeth Mandala | Published by: Navaneeth Mandala on Tuesday, January 16, 2024 9:05 pm | News Categories: Business, India
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