India's visible trade deficit for December narrowed from a year ago, as imports fell more than exports amid the falling oil prices, data from the Ministry of Commerce and Industry showed Thursday.
The merchandise trade deficit contracted to $9.434 billion from $10.187 billion in the same month last year.
Imports dropped 4.78 percent annually and exports fell 3.77 percent. Oil imports tumbled 28.6 percent from a year ago, while non-oil imports grew 9.9 percent.
In the April to December period, the country registered a trade deficit of $110.051 billion versus $107.077 billion a year ago. Exports grew 4.02 percent and imports increased 3.63 percent with oil imports falling 4.7 percent.
Earlier today, the Reserve Bank of India cut interest rates in a surprise move citing a fall in inflation in recent months, mainly due to lower crude oil prices.
Today's decision came ahead of the bank's scheduled meeting on February 3 and the government's annual budget announcement in late February.
"With lower external vulnerabilities, interest rates do not need to stay as high to continue attracting foreign capital," Capital Economics India economist Shilan Shah said.
"As such, this further supports our view that the RBI will follow up today's rate cut with more monetary easing over the coming months."
The economist also noted that a feared surge in gold imports after the curbs were lifted on November 28 failed to materialize.
"One possible explanation is that, prior to the removal of restrictions, there had been rumors circulating that restrictions would actually be tightened. This may have caused local jewelers to pre-emptively purchase gold in November," Shah added.
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