India’s merchandise trade deficit moderated to USD 17.9 bn in Jan-22 from USD 21.7 bn in Dec-21. The easing of pressure on trade deficit was predominantly on account of temporary disruption to economic activity from Omicron. Despite sequential easing of headline exports and imports, which was predominantly on account of oil and gold, core trade activity continued to remain at healthy levels. With the third wave of COVID now receding, lockdown restrictions have begun to taper. This will bring back pent-up demand, which along with year end seasonality and elevated commodity prices, would once again start putting pressure on trade deficit. We continue to expect India’s FY22 current account deficit at USD 48 bn vis-à-vis a surplus of USD 24 bn seen in FY21.
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