India June trade deficit narrows to 15-month low

The current value of USD10.3b is expected to dip further to around 3% of GDP in FY13.

In a release by Nomura, the Ministry of Commerce released initial estimates of India‟s trade deficit shrinking to USD10.3bn in June from USD16.3bn in May, the lowest in 15 months. Exports contracted by 5.5% y-o-y in June following a 4.2% contraction in May as dwindling global demand more than offset the positive impact of INR depreciation.

Here's more from Nomura:

However, imports contracted by an even larger 13.5% y-o-y in June after a 7.4% decline in May, more than compensating for the fall in exports. In our view, while lower oil prices are partly responsible for the drop in the oil import bill, INR depreciation is starting to narrow the non-oil import bill.

Gold imports are also down as a result. As the lagged effect of rupee depreciation plays out, we expect the current account deficit to narrow further to around 3% of GDP in FY13 (year ending March 2013) from a record high of 4.2% in FY12.