India’s sharp rise in trade deficit in October to a record high, driven by a broad increase in imports, was likely an exception, analysts said.

India’s trade deficit hit a record high of $31.46 billion in October, widening sharply from $19.37 billion in the previous month. Imports increased from $53.8 billion to $65 billion.

“On a sequential basis, approximately 70% of the increase in imports in October was driven by imports of oil, gold and silver,” Morgan Stanley said in a note. The increase in gold and silver imports could potentially be due to “some spike” in demand ahead of the Diwali festive season, the bank added.

Regarding the increase in oil imports, IDFC First Bank said this likely reflects import concentration at the start of the period, as crude oil prices declined in October.

On a monthly and annual basis, India’s trade deficit increased to 10.4% of GDP in October from 6.4% of GDP in September.

“Despite the shock to the trade deficit, we maintain our current account deficit (CAD) forecast for FY24 at 1.9 per cent of GDP,” said Gaura Sen Gupta, economist at IDFC First Bank.

“This is because October figures are expected to be timely and imports of gems and jewelery are expected to normalize from November.

Additionally, falling oil prices provide a bit of a buffer, Gupta said. Brent crude fell about 8% in November, after falling by the same amount last month.

Morgan Stanley said the high trade deficit in October was likely an anomaly.

“We expect the trade deficit to narrow significantly in November and December,” Morgan Stanley said, estimating that the trade deficit for the December quarter will range between 2 and 2.4 percent of GDP.

Sakshi Gupta, senior economist at HDFC Bank, said he is not reviewing CAD estimates or USD/INR forecasts for now considering October’s trade deficit figures. (Reporting by Nimesh Vora; Editing by Eileen Soreng)