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Nomura pegs May trade gap at $21 billion

Last Updated: Monday, June 10, 2013 - 22:22

Mumbai: Foreign brokerage Nomura on Monday said the trade deficit in May is expected to be at an all-time high of USD 21 billion due to sluggish external demand, high gold imports and seasonally higher fertiliser and chemical imports.

"We expect a record-high trade deficit of USD 21 billion in May from USD 17.8 billion in April," brokerage's chief economist Sonal Varma said in a note ahead of the release of the official data later this week.

It said imports of chemical and fertilisers usually go up in May and fall in gold prices has led to an increase in the volume of imports to 162 tonne in the month.

Additionally, the external demand has also been sluggish, which will continue to be a drag on the overall trade deficit, it said.

However, the trade deficit will improve in June, she said, adding the poor numbers on the trade deficit front for April and May would mean the current account deficit would come under pressure again.

The current account gap will widen to 5.5 to 6 percent of the GDP for the April-June quarter, she added.

"Financing the current account deficit, therefore, remains a concern, and it is also one of the main reasons why we expect no repo rate cut in June," the note said, referring to its expectations from the Reserve Bank's mid-quarter policy review scheduled for June 17.

The Reserve Bank has identified the rising current account deficit, which is expected to touch an all-time high of 5.7 percent in the third quarter of FY13, as a major concern.

Many of Nomura's peers, however, expect a 0.25 percent cut from the RBI at its June 17 policy review meeting.


First Published: Monday, June 10, 2013 - 22:22
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