Cash position in economy may not be enough till March: Nomura

The impact of demonetization 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% in December.

The moderation in India's exports volume suggests that demonetization 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 April-January of the current fiscal, up about 1% over the year-ago shipments.

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

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