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Tuesday, March 18, 2025

India's Trade Deficit Hits 42-Month Low as Gold and Crude Imports Decline

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India's Goods Trade Deficit Hits 42-Month Low as Gold, Silver and Crude Imports Decline

India's merchandise trade deficit narrowed significantly to a 42-month low of $14.05 billion in February 2025, driven primarily by reduced imports of gold, silver, and crude oil, according to the latest data released by the Ministry of Commerce and Industry. This marks a substantial improvement from the $22.9 billion deficit recorded in January 2025 and the $19.5 billion deficit seen in February 2024.

Sharp Decline in Precious Metals and Crude Imports

A key factor contributing to the narrowed deficit was the notable reduction in precious metals imports. Gold and silver imports plummeted to $2.7 billion in February 2025, reaching their lowest level since June 2024, when imports stood at $2.5 billion.

Similarly, crude oil and petroleum imports fell to $11.89 billion, marking the lowest figure since July 2023, when imports were valued at $11.81 billion. This significant reduction in high-value imports has played a crucial role in improving India's trade balance.

Overall Import-Export Performance

India's export performance showed some weakness with goods exports valued at $36.9 billion in February 2025. More notably, imports declined to a 22-month low of $50.9 billion, representing a substantial drop in the country's import bill.

On a year-on-year basis, exports experienced a 10.84% decline in February 2025 compared to the same month last year. According to Aditi Nayar, Chief Economist at credit rating agency ICRA, "A portion of the YoY decline in merchandise exports can be attributed to the base year effect related to the leap month."

The import figures showed an even steeper decline, with a 16.3% contraction in February 2025 compared to February 2024. This significant reduction in imports has been instrumental in narrowing the trade deficit to multi-year lows.

Positive Outlook for Current Account Balance

The substantially reduced trade deficit presents a positive outlook for India's current account balance. The February deficit of $14.05 billion is significantly lower than the average deficit of over $23 billion recorded during the first ten months of FY2025.

This improvement has led experts to revise their forecasts for India's current account. "Given this, we now expect the current account to witness a surplus of around $5 billion in Q4 of FY2025, equivalent to around 0.5% of the GDP, in the ongoing quarter," noted Ms. Nayar from ICRA.

Services Trade Remains Strong

India's services sector continues to demonstrate resilience and growth. In February 2025, services exports reached $35.03 billion, while services imports stood at $16.55 billion. These figures represent significant growth compared to February 2024, when services exports and imports were $28.33 billion and $15.23 billion, respectively.

The robust performance of the services sector has provided additional support to India's overall trade balance, helping to offset some of the challenges faced in merchandise trade.

Global Trade Context and Future Outlook

The latest trade data takes on added significance against the backdrop of a depreciating Indian currency and persistent uncertainties in global trade policies, particularly from the United States. Despite these challenges, India remains committed to expanding its international trade relationships.

Trade Secretary Sunil Barthwal emphasized that "India is proactively engaged with the U.S. to address concerns of both countries and expand trade to $500 billion." This underscores India's commitment to resolving trade tensions and fostering stronger economic ties with key trading partners.

The significant reduction in the trade deficit, if sustained, could help stabilize the Indian rupee and improve market sentiment toward the Indian economy. However, analysts will be closely monitoring whether this improvement represents a temporary fluctuation or the beginning of a more enduring trend in India's external trade position.

Disclaimer: The views and investment tips expressed in this article are for informational purposes only and do not represent financial advice. The views expressed are those of the sources cited and not necessarily those of this website or its management. Investing in equities or other financial instruments carries the risk of financial loss. Readers must exercise due caution and conduct their own research before making any investment decisions. We are not liable for any losses incurred as a result of decisions made based on this article. Please consult a qualified financial advisor before making any investment.

Bajaj Finserv Plans to List Insurance Entities by FY27 After Allianz Stake Acquisition

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Bajaj Finserv Plans to List Life and General Insurance Entities by FY27

In a significant strategic move, Bajaj Finserv Ltd. is reportedly planning to list its life and general insurance businesses in the financial year 2027, according to exclusive sources familiar with the matter. This development comes on the heels of the company's announcement regarding the acquisition of Allianz's stake in their joint insurance ventures.

Complete Ownership Acquisition from Allianz

On Monday, Bajaj Finserv made a landmark announcement that it, along with other promoter entities, will acquire the 26% stake held by Allianz in both Bajaj Allianz Life Insurance and Bajaj Allianz General Insurance. This strategic buyout will result in Bajaj Finserv and its promoter companies gaining 100% ownership of both insurance businesses.

The financial details of the transaction reveal the substantial valuation of these insurance entities:

  • Bajaj Finserv and promoter companies will pay ₹13,780 crore for the 26% stake in Bajaj Allianz General Insurance, valuing the entity at a remarkable ₹53,346 crore
  • An additional ₹10,400 crore will be paid for the 26% stake in Bajaj Allianz Life Insurance, placing the company's valuation at ₹40,000 crore

No New Partners on the Horizon

Sources have indicated that Bajaj Finserv is not seeking any new strategic partners for its insurance entities following the exit of Allianz. This suggests the company's confidence in managing and growing these businesses independently before potentially taking them public.

Market Impact and Analyst Perspectives

The announcement has generated positive sentiment in financial circles. Brokerage firm Emkay noted in its analysis: "This deal does not change anything as far as the operations of BAGIC and BALIC are concerned. Removal of the overhang about Allianz's future in this JV can be looked at as sentimentally positive."

The brokerage maintains a "buy" rating on Bajaj Finserv with a price target of ₹2,000, indicating confidence in the company's strategic direction and growth prospects following this acquisition.

Market Performance Context

This strategic move comes at a time when the Indian stock market has been showing interesting movements. Among the top gainers on the NSE were companies like TT with a 19.98% increase, HP Adhesives rising by 15.31%, and Uttam Sugar Mills gaining 14.92%.

Insurance Sector Growth in India

The potential listing of Bajaj's insurance entities aligns with the broader growth trajectory of India's insurance sector. With increasing insurance penetration, growing awareness about financial protection, and favorable demographic trends, insurance companies are well-positioned for sustained growth in the coming years.

For Bajaj Finserv, complete ownership of its insurance businesses provides greater flexibility in operational decision-making and strategic planning ahead of the potential public listings. This move could unlock significant value for shareholders and provide capital for further expansion.

Future Outlook

As Bajaj Finserv prepares for the potential listings by FY27, investors and market watchers will be closely monitoring the performance metrics of both insurance entities. Key factors that could influence their valuations include premium growth, claim ratios, investment performance, and product innovation.

With India's insurance sector poised for robust growth in the coming years, the timing of these potential listings could prove strategic for maximizing shareholder value while capitalizing on favorable market conditions.

Disclaimer: The views and investment tips expressed in this article are for informational purposes only and do not represent financial advice. The views expressed are those of the sources cited and not necessarily those of this website or its management. Investing in equities or other financial instruments carries the risk of financial loss. Readers must exercise due caution and conduct their own research before making any investment decisions. We are not liable for any losses incurred as a result of decisions made based on this article. Please consult a qualified financial advisor before making any investment.