Economy – Foreign Trade- Imports’ growth in single digit: Angel Broking

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Economy – Foreign Trade
Imports’ growth in single digit

High exports growth and deceleration in imports growth kept
India’s trade deficit below US$10bn in Oct ’10, for the second
consecutive month. The unfavorable base is likely to suppress
foreign trade growth in 2HFY11.


 Exports growth maintains momentum. India's exports grew
21.3% to US$18bn in Oct ’10, marking the twelfth consecutive
month of double-digit growth. During Apr-Oct ’10, exports at
US$121bn grew 26.8% over the same period in FY10.

 Import growth dips to single digit. Import growth sharply
decelerated to 6.8% in Oct ’10 from 26.1% in Sep ’10. During
Apr-Oct ’10, imports grew 26% to US$194bn.

 Trade deficit remains below US$10bn. Trade deficit in Oct ’10
stood at US$9.7bn, remaining below the US$10-bn mark for the
second consecutive month.

 Deceleration in non-oil imports continues. Non-oil imports
continued to decelerate for the third straight month and declined
to US$19.3bn in Oct ’10 from US$19.7bn in Sep ’10. During
Apr-Oct ’10, non-oil imports at US$137bn grew 26.7% over the
same period last year.

 Oil imports flat. Oil imports grew merely 0.3% to US$8.4bn in
Oct ’10. On mom basis, however, oil imports increased 12.3% in
Oct ’10 as both oil-import volume and oil prices increased 5.3%
and 6.6% respectively.

 Assessment. The deceleration in non-oil imports, for the third
consecutive month, indicates reduced industrial activity on the
domestic front. This substantiates the low single-digit IIP growth
during Aug-Sep ’10. Extended monsoon may be one of the
reasons for the deceleration. We expect non-oil imports to start
improving in the coming months.

 Foreign trade outlook. The favorable base effect in the past
year has led to high growth in both exports and imports.
However, the base effect will turn unfavorable going forward and
result in low single-digit growths. But this does not imply any
deterioration in India’s foreign trade. The estimated trade deficit
at US$131bn in FY11e would be considerably higher than the
previous high of US$116bn in FY09.