India's current account deficit expected to fall to around $10 billion or 1% in Q1: India Ratings

Imports are expected to be around  $163 billion during the period, up from a seven-quarter low of $160.3 billion witnessed in Q1 FY24, due to increase in crude prices since July.

This will have the overall trade deficit printing in at a three-quarter high of $64 billion, the rating agency said.

Another reason is the moderation in services demand since June due to the slowdown in the global economy. Global services PMI stood at a five-month low of 52.7 in July. Thus, services trade surplus to remain around $36 billion in Q2, it said.

Merchandise exports contracted even in Q1 by coming in 14.1 percent lower than the year-ago period. This was the biggest decline in the last 12 quarters. Goods exports stood at a seven-quarter low of $104 billion in Q1 FY24.

Merchandise imports came down to a seven-quarter low of $160.3 billion in Q1, while goods imports shrunk 12.7 percent in the same period, which was the sharpest fall since Q2 FY21.

Benign commodity prices helped in reducing the country's import bill as the inbound shipments of critical commodities such as crude (18.5 percent) coal (32.4 percent), organic chemicals (31.9 percent) and vegetable oils (32.9 percent) came down in value terms.