Economy – Foreign Trade -- Trade deficit at five-year low :: Anand Rathi

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Economy – Foreign Trade
Trade deficit at five-year low
India’s exports have outgrown imports in the past four months,
resulting in considerable narrowing of the trade deficit. A sharp
fall in oil imports in Dec ’10, however, is intriguing. Overall,
improving outlook of the global economy would continue to
support India’s exports. Our exports target of US$211bn for
FY11 looks within reach.

 Lowest monthly trade deficit in five years. India’s exports in
Dec ’10 rose 36% to US$22.5bn, while imports declined 11% to
US$25bn. Hence, India’s trade deficit narrowed to US$2.6bn –
the lowest monthly deficit since Mar ’06.
 High oil price, low oil-import volume. Oil imports contracted
16% to US$6.9bn in Dec ’10. Though oil prices increased 23%
yoy in Dec ’10, a 32% yoy decline in volume led to the sharp fall
in oil imports.
 Major sectors boosting exports. Engineering goods, petroleum
& crude products, paper/wood products, rubber manufactured
products, ores & minerals, and Textiles are the key sectors that
are contributing to the high exports growth in the current fiscal.
 Egypt crisis and India’s trade. Since Egypt accounts for less
than 1% of India’s total exports, we do not see any significant
impact of the political crisis there on India’s foreign trade.
 Foreign trade outlook. In the past four months, exports
outgrew imports, leading to narrowing of the trade deficit. A
sharp fall in imports, however, does not bode well for the
expanding domestic economy. India’s trade deficit for FY11
seems to be well below our expectations of US$131bn.