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Dec’19 trade deficit at USD11.3b, lower than consensus of USD11.6b
*India’s merchandise trade deficit narrowed to USD11.3b (consensus: USD11.6b) in Dec’19 from USD12.1b a month ago and USD14.5b a year ago due to a faster decline in imports than exports. While imports declined 8.8% YoY to USD38.6b, exports were down 1.8% YoY to USD27.4b in the month.
* The higher decline in imports is attributable to (a) seven consecutive months of lower petroleum imports and (b) the first decline in gold imports (-3.9% YoY) in three months. In fact, oil imports declined at the slowest pace of 0.8% YoY in seven months. Crude oil price averaged USD65.6/barrel in Dec’19 v/s USD62.4 a month ago.
* Other major items witnessing a decline in imports were electronic goods, transport equipment, iron & steel, non-ferrous metals, pearls, precious and semi-precious stones, and organic and inorganic chemicals. These items together accounted for ~32% of total imports in the month.
* Although exports declined YoY, they were at a seven-month high in absolute terms, largely because of higher non-oil exports on a sequential basis. Nevertheless, both oil/non-oil exports declined 4.2%/1.4% to USD3.9b/USD23.5b. Exports of items such as engineering goods, gems & jewelery, organic and inorganic chemicals were also down YoY in the month.
* On a year-to-down basis, India’s foreign trade position has improved, with exports increasing 5.2% YoY to USD256.6b and imports declining 7.5% YoY to USD360.9b over Apr-Dec’19. Consequently, overall trade balance so far this financial year stands 20.3% lower YoY at USD118.1b.
* We expect crude oil prices to hover around the range of USD65 per barrel, which might keep the import bill muted.
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