Note ban impact: Cash situation to become normal in March, says Nomura

Note ban impact: Cash situation to become normal in March, says Nomura

The impact of demonetisation is still visible and cash levels in the economy are not expected to be sufficient until March, which may keep trade volumes depressed for the next two months, says a Nomura report.

As per data released by the commerce ministry, growth in exports in January was lower than 5.72 per cent in December.

The moderation in India's exports volume suggests that demonetisation may still be affecting cash-intensive export sectors, Nomura said in a research note, adding that "we do not interpret this as a sign of reduced competitiveness".

"We expect trade volumes to remain subdued for another month or two as we do not expect sufficient cash levels in the economy (for transactions)

until the end of March," Nomura India Chief Economist Sonal Varma said in the note.

According to official figures, exports totalled $220.92 billion for AprilJanuary of the current financial year, up about one per cent over the yearago shipments.

The trade deficit -- the difference between imports and exports -- for AprilJanuary, however, improved to $86.38 billion in comparison to $107.74 billion in the same period last financial year.

"However, with higher commodity prices and expectation of a domestic demand recovery in the second half (after remonetisation), we expect the current account deficit to widen marginally to a still-sustainable 1.3 per cent of GDP in 2017 from 0.8 per cent in 2016," Varma added.

Article By – Business Standard