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India's weakening exports slows trade deficit moderation - Barclays

Workers carry sacks of wheat for sifting at a grain mill on the outskirts of Ahmedabad

MUMBAI (Reuters) - India's large trade deficit is beginning to consolidate, but the 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.

In that same period, merchandise exports have moderated from $36.2 billion in July to $33.9 billion in August, to $32.6 billion in September. The import bill, meanwhile, had dropped to $59.3 billion in September from $61.9 billion in August.

"Exports are moderating despite some stabilisation in petroleum shipments, with bulk of the weakness in non-oil, non-jewellery exports," Rahul Bajoria, India economist at Barclays Bank, said.

India's potentially faster growth path amid a deteriorating global backdrop could bring the risks of a slower pace of decline in the trade deficit and that of a wider current account deficit, Bajoria said.

Despite the trade deficit moderating since the record high of $30 billion in July, the overall gap remains large, Bajoria noted.

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

"As a result, while the RBI (Reserve Bank of India) continues its battle to reduce inflation, it will not lose sight of evolving risks to India's macroeconomic stability."

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