India’s trade deficit narrowed in September as imports declined at a faster rate than exports, indicating a weakening domestic demand in the country. According to government data released on Friday, the trade goods deficit stood at $19.37 billion, down from $27.98 billion the previous year.
Imports Fall Sharply
Imports experienced a significant decrease of 15% to a total of $53.84 billion. This decline was seen across various sectors, including fertilisers, transport equipment, coal, and petroleum. A total of 20 out of 30 key sectors recorded lower import levels.
Exports Remain Steady
While exports also saw a marginal decrease compared to the previous year, the decline was overshadowed by the more significant fall in imports. This resulted in a smaller trade deficit for India.
Easing Inflation Corresponds with Lower Demand
The reduced demand for foreign goods aligns with the easing inflation in India. In September, prices rose by 5.0%, which was a deceleration from the previous month. This inflation rate is within the target range set by the Reserve Bank of India. One of the contributing factors to this easing inflation is the lower fuel prices when compared to the same month last year.
As India’s trade deficit narrows, it reflects the impact of weakening domestic demand on the country’s import levels. The decline in imports, especially in key sectors, combined with steady export figures, has contributed to a reduced trade deficit. Additionally, the easing inflation further supports this trend by reflecting lower demand for foreign goods.