India: Export growth to soften:: Macquarie Research,

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India: Export growth to soften
Event
�� India announced provisional trade data for August.
Impact
�� Export and import growth decelerates: According to the provisional trade
data released, goods export growth decelerated to 44.2% YoY in August from
81.8% YoY in July partly on the base effect. Import growth, also decelerated
to 41.8% YoY in August from 51.5% YoY in the previous month.
�� Trade deficit widened: Monthly trade deficit widened to US$14.1bn (9.1% of
GDP annualised) compared to US$11.1bn (7.3% of GDP annualised) in July.
On a three-month trailing basis, trade deficit remained high at 7.1% of GDP
annualised in August compared to 7.4% of GDP annualised registered in the
previous month.
Outlook
�� Global growth uncertainty to weigh on export outlook: The US debt
downgrade and evolving debt issues in Europe have increased uncertainty
about global growth environment and thus export linkages. The US new
orders index that leads India’s export growth by 4-months has been falling
over the past 5 months albeit a slight pick up in August 2011 indicating more
weakness ahead. We expect export growth to slow over the coming months.
�� Non oil import growth will be affected by slow demand: We expect
domestic demand to slow over the coming quarters. Slowing growth will also
result in moderation in non-oil import demand. However, oil imports will be
driven by the movement in global crude oil prices. We expect the three-month
trailing trade deficit to remain largely range bound at 6-7% of GDP,
annualised over the coming months, barring a sharp movement in global
commodity prices.