Published on 16/09/2020 9:27:36 AM | Source: Motilal Oswal Financial Services Ltd

India`s foreign trade deficit in Aug`20 below expectations - Motilal Oswal

Posted in Economy News| #Economy #Motilal Oswal

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India’s foreign trade deficit in Aug’20 below expectations

* Exports from India declined at 3-month highest pace of 12.7% YoY to USD22.7b. However, shipments into the country declined at a faster rate of 26.1% YoY to USD29.5b in Aug’20. This has led to a trade deficit of USD6.8b in Aug’20 (v/s USD4.8b in Jul’20, but nearly half of the USD13.9b deficit in Aug’19)

* The number was lower than market consensus of USD7b and our forecast of USD12.3b.

* Therefore, India’s cumulative trade deficit in the first five months of FY21 stood at USD20.7b, 73.1% lower than USD77.3b during the corresponding months last year . While exports during Apr-Aug’20 declined 26.7% YoY to USD97.7b compared with last year, imports contracted faster by 43.7% YoY to USD118.4b .

* While petroleum imports declined 41.6% YoY to USD6.4b, non-oil imports also declined at 20.1% YoY to USD23b in Aug’20 . Gold imports in Aug’20 rose to a 6-month high of USD3.7b compared with USD1.8b worth of gold imported a month ago. Non-gold imports, therefore, declined much faster at 33% YoY to USD25.8b in Aug’20. Among other non-oil non-gold items, electronic goods, electrical and non-electrical machinery, chemicals, pearls, precious stones and semi-precious stones also witnessed sharp declines last month

* As for exports, while petroleum exports contracted at a slower pace of 40% YoY to USD1.9b, non-oil exports declined faster by 8.8% YoY to USD20.8b during the month. Items such as raw materials for textiles, electronic goods and leather products saw contraction in the range of 15-20% in Aug’20. Export of gems and jewelry witnessed a huge decline of nearly 45% YoY in Aug’20

* Overall, India’s foreign trade is still very weak compared to pre-COVID or year ago levels. The current data, besides indicating uncertainty of the situation, also poses a risk to India’s external trade in the coming days. A relatively faster decline in exports in Aug’20 compared with Jul’20 does not bode well for external demand of Indian goods. Moreover, this comes at a time when the country is assumed to have largely come out of the lockdown. Additionally, while imports have improved much from Apr-May’20 levels, the near 30% decline is still very huge and indicates slow paced recovery in domestic demand.


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