Economic Spotlight: Monthly Trade Deficit Highest in 3 Years

18th January 2018 By Edelweiss

A ~$15bn trade deficit was the highlight of yesterday’s foreign trade data. The pace of rise in exports was sluggish at 12.4% while imports remains buoyant at 21.1%. For the year, India’s trade balance is now ~$115bn, a 46% jump over the same period in FY17. The key contributors to worsening of trade balance is clearly Oil and Gold imports.

 

Key Highlights
  • Oil imports are up by 24% this year YTD (year to date) but in last three months the rise has been 34% on average. This doesn’t come as a surprise because the rise in global oil prices is what causes India’s import bill to surge.
  • Gold imports have also been quite steep rising 49% YTD in FY18. Gold imports contribute about 9% to India’s import bill while Oil imports contribute 22% to it.
  • The deterioration in trade balance is largely driven not only by rising imports but sluggish exports. India’s exports are up 12% YTD in FY18 whereas imports are up 22%. The oil trade balance this year has deteriorated by about 6%, since oil exports are up 18% versus imports at 24%.
  • Over the last few months RMG exports have begun to degrow at 19% (3MMA). Until this segment of the exports pick up, a broad based recovery will be difficult.
  • In the last quarter of FY18 exports should see an uptick driven by resolution of disruptions due to GST. This should be visible in labour intensive exports which largely come from the MSME sector.

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