India’s large trade deficit is beginning to consolidate, but weaker exports are prompting a more gradual adjustment than expected, Barclays Bank said in a note on Tuesday.

India’s trade deficit fell to $26.7 billion in September from $28 billion in August and $30 billion in July.

During the same period, exports of goods fell to $33.9 billion in August and $32.6 billion in September, from $36.2 billion in July. The import bill, meanwhile, fell to $59.3 billion in September from $61.9 billion in August.

“Exports are easing despite some stabilization in oil supplies, with most of the weakness in non-oil and non-jewellery exports,” said Rahul Bajoria, India economist at Barclays Bank.

India’s potentially faster growth trajectory against a deteriorating global backdrop could carry the risks of a slower decline in the trade deficit and a larger current account deficit, Bajoria said.

Although the trade deficit has narrowed since July’s record high of $30 billion, the overall gap remains wide, Bajoria noted.

India’s current account deficit remains on track to reach $115 billion or 3.3% of gross domestic product (GDP) in the current fiscal year, he estimates.

“Therefore, as the RBI (Reserve Bank of India) continues its fight to curb inflation, it will not lose sight of evolving risks to India’s macroeconomic stability.”

(Reporting by Nimesh Vora; Editing by Savio D’Souza)

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