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Trade deficit normalizes in November

Goods trade deficit in November normalized back to around the US$20 bn handle, as the festive season-led demand faded and oil imports fell. Services surplus in November remained high and steady. Risks to the external sector remain from any escalation in geopolitical tensions, volatile energy prices and volatility from the differing pace in DM rate cycles. We maintain our FY2024-25 CAD/GDP estimates at 1.6%.

Exports in November remain steady at around US$34 bn

Exports in November remained steady at US$33.9 bn (October: US$33.5 bn; (-) 2.8% yoy)—oil exports increased to US$7.5 bn (October: US$6 bn), whereas nonoil exports fell to US$26.4 bn (October: US$27.5 bn) (Exhibits 1-5). Non-oil exports registered marginal declines from October levels across engineering goods, gems & jewelry and electronic goods, among others (Exhibit 6). In 8MFY24, engineering goods, gems & jewelry, pharma products, electronic goods and chemicals remained the top exports (Exhibit 7).

Across the board decline in November’s imports

Imports in November fell back to US$54.5 bn (October: US$63.5 bn; (-)4.3% yoy), led by a decline in oil and non-oil imports (Exhibits 1-5). Compared with October levels, a fall in non-oil imports was led by normalization in gold and decline in electronics along with marginal decline in other goods (Exhibits 6). In 8MFY24, non-oil imports have been boosted by electronics, gold and machinery (Exhibit 7). Trade deficit narrowed to US$20.6 bn in November (October: US$29.9 bn).

Services surplus remained steady in November

Services surplus in November remained firm at US$15.3 bn, with exports at US$28.7 bn and imports at US$13.4 bn (Exhibit 8). We expect the services surplus in FY2024 to remain robust at around US$148 bn, though risks to net exports of software and non-software services are skewed toward the downside, given a gradual slowdown in DMs.

Maintain our FY2024-25 CAD/GDP estimate at 1.6% each

For the rest of FY2024 and most part of FY2025, we continue to expect some external sector risks to persist owing to (1) any escalation in geopolitical conflicts, (2) volatility in energy prices and (3) any volatility from the differing pace in DM rate cycles. Risks of a deep global slowdown have been pushed back, amid relatively resilient growth displayed, so far, though growth is likely to slowdown in mid-CY2024. We maintain our FY2024-25E CAD/GDP at 1.6% (both years), with overall BOP at a marginal surplus (Exhibit 9). If crude prices sustain at current levels (around US$75/bbl compared with our assumption of US$85/bbl), CAD/GDP could be lower by around 40 bps (around US$15-17 bn lower).

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