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Trade Deficit Widens to US$15.36bn on Higher Crude Imports
* India’s trade deficit stood at $15.36bn in May’19 as against US$15.33bn in Apr’19, below consensus expectation of US$15.84bn.
* Imports grew by 4.3% YoY in USD terms to US$45.35bn as against 4.48% YoY in Apr’19. The items which showed higher imports include: Petroleum (+8.2%), Gold (+37.4%), Metals (+11.7%), Pharmaceuticals (+15.2%) and Chemicals (+3.2%). Non-oil non-gold imports declined by 1.3% YoY led by drop in imports of precious stones (-24.7%), fertilisers (-21.2%), electronic goods (-3.2%), vegetable oil (-11.9%) and transport equipment (-3%).
* Cumulative imports for FY20 grew by 4.4% YoY to UD$86.75bn owing to higher oil imports. However, we expect oil imports to come down on MoM basis on account of current cool off in crude prices led by global growth concerns. Non-oil, non-gold imports continue to show a declining trend, helping to curb the import bill.
* Exports grew by 3.9% YoY to US$29.99bn as against 0.6% in Apr’19 led by higher exports of Engineering Goods (+4.4% YoY), Organic & Inorganic Chemicals (+20.6% YoY), Drugs & Pharmaceuticals (+11% YoY), Electronic Goods (51%) and RMG of all Textiles (+14.2% YoY). Exports of petroleum products and Jewellery declined by 1.4% and 4.3% YoY, respectively. Exports of Processed food items have been on an upward trajectory after introduction of Agri Exports Policy, showing a growth of 12% YoY whereas other items i.e. tea, oil seeds, fruits and vegetables and spices also showed positive growth.
* India’s cumulative exports grew by 2.4% YoY to US$56.07bn in FY20. It is pertinent to note that non-petroleum and non-Jewellery exports have started to pick-up showing a decent growth of 7.4% YoY. Since petrol and Jewellery forms a substantial chunk of our exports, non-petrol exports need to pick-up at a faster pace in order to curtail the trade deficit.
* We expect lower imports to narrow trade deficit from the current levels in the short-term led by increase in non-oil exports, lower oil imports and a stable INR at $69-$70 levels.
Imports and Exports decline
Trade deficit widens on account of higher imports and rising oil prices
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