India Trade Update – Sept Deficit Narrows to US$9bn: Citi

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India Macro Flash
Trade Update – Sept Deficit Narrows to US$9bn; Commodity
Composition Data Reveal Interesting Trends


 Sept Trade Deficit Narrows to US$9bn — India’s trade deficit, which had averaged
over US$11bn+ for the first few months this fiscal, unexpectedly narrowed to
US$9bn in September. This was largely due to a deceleration in import growth to
US$27.1bn, +26% from 30%+ levels earlier this year. Trends in imports were led by
oil imports at US$7.5bn (+14.4%) and non-oil imports at US$19.7bn (+31%); while
exports were US$18bn up 23.3%. On a cumulative basis, the trade deficit during
Apr-Sept was up US$21.7bn v/s US$14.5bn in the same period last year



 Commodity Composition of Trade — Data on the commodity composition of trade
has also been released for the Apr-June qtr. Trends in exports indicate this was led
by petroleum products, ores, engineering goods, and gems & jewellery, while
garments and handicrafts were in the red (down 5% and 35% respectively). As
regards imports, besides crude up 54%, non petroleum imports that were up
include precious stones, textiles, chemicals and iron & steel. Interestingly, capital
goods, gold and electronic imports were in negative territory, down 1.1%, 11.3%
and 5% respectively. Pls see pg 4 for annual and 1QFY11 trends in commodity
composition of trade.


 Maintain FY11 customs trade deficit widening to US$140.3bn — Going forward
and taking into account the base effect (export growth averaged 28.5% in 1HFY10
v/s a contraction of 25% in 1HFY10), we expect export growth to decelerate in the
coming months averaging 16.6% on a YoY basis. While we also expect the base
effect to impact imports, the deceleration in import growth is likely to be lower due
to an upturn in commodity prices and underlying momentum in the economy. We
thus maintain our FY11 customs trade deficit to widen to US$140.3bn v/s
US$108.2bn in FY10.