India's Trade Deficit Set to Widen as Oil Imports Surge
India's merchandise trade deficit may see a rebound in September due to higher oil imports and pre-festive season demand, according to Emkay Global's research note. The brokerage expects the deficit to widen further after shrinking to a five-month low of $27 billion in August from July's $32 billion gap.
The decline in total goods imports in August was mainly driven by a 9% sequential dip in oil imports, which landed at $16.7 billion, supported by a massive drop in gold imports and capital goods purchases. However, Emkay notes that the overall volume of crude oil imported in the fiscal year-to-date is slightly higher than last year.
Emkay attributes the lighter import bill to older cargoes contracted in July, when crude prices were hovering around $80 per barrel. The brokerage also flags a significant vulnerability on the horizon - sharply higher global chip prices pose a clear upside risk, threatening to inflate the overall electronics import bill in the coming months.