March witnessed a notable drop in the trade deficit to USD15.6 billion, the lowest in 11 months, primarily due to a decline in imports, particularly in gold. Despite this, exports saw a slight increase. However, the oil deficit increased due to rising imports and falling exports, alongside higher crude prices. On an annual basis, both exports and imports decreased. For the fiscal year FY24, exports amounted to USD436.7 billion, down by 3.2%, while imports stood at USD677.5 billion, a 5.4% decrease, resulting in a goods trade deficit of USD240.8 billion. Gold imports notably rose by 30.1% YoY due to increased prices and volumes, while oil imports declined by 14% YoY.

Core exports experienced positive growth for FY24, with March marking the fifth consecutive month of core deficit reduction. Major export categories, excluding petroleum, witnessed significant growth both on a monthly and yearly basis. However, gold imports plummeted sharply in March due to lower volumes amid record-high gold prices.

In March, the services trade surplus decreased to USD12.7 billion, marking an eight-month low. Both exports and imports declined by approximately 6% MoM, contributing to the surplus decline. Despite a robust performance earlier in the fiscal year, recent months have seen a slowdown in the services surplus, potentially indicating challenges for the sector in FY25.

For Q4FY24, a current account surplus of 0.2% of GDP is anticipated, driven by better-than-expected goods and services exports, particularly in software. FY24E CAD/GDP is projected at 0.8%, with a BoP surplus of USD42 billion, supported by healthy FPI flows. However, risks such as higher commodity prices and geopolitical tensions may impact these forecasts. Looking ahead to FY25, non-IT services are expected to maintain positive momentum, while goods and IT exports may face slower growth amid weakening global demand. With Brent projected at USD85/bl, FY25E CAD/GDP is expected to remain comfortable at 1.1-1.2% of GDP.