Trade deficit cools down to USD14bn in February 2013 as exports pick up - Angel Broking

India's exports gained traction in February 2013 and reported growth for the second straight month at 4.2% yoy (USD26.3bn) as compared to marginal 0.8% yoy growth in January 2013 signaling an improvement in external demand.

Moreover, growth in imports during the month decelerated to 2.6% yoy (USD41.2bn) as against 6.1% yoy in January 2013. On account of the positive trend in both imports as well as exports, the trade deficit narrowed to USD14.9bn, the lowest in 10 months, from USD20bn in the previous month and USD15.3bn in February 2012. Oil imports reported 15.5% yoy growth (as against a steep 44.6% yoy growth in February 2012) while non oil imports reported a 3.9% yoy contraction (as against 13.2% yoy growth in February 2012).

On a cumulative basis, exports in the April - February 2013 period contracted by 4.0% yoy in USD terms while import growth during the period remain flat to a large extent. The trade deficit in April - February 2013 period, came at USD182.1bn as compared to USD169.8bn in the corresponding period of the previous year widening by 7.2%.

Surging trade deficit at 11.7% of GDP in 2QFY2013 is the primary reason for a record-high current account deficit at 5.4% of GDP in 2QFY2013. As the trade deficit widens, the possibility of CAD reaching a record-high (nearing 5% of GDP) for FY2013 as a whole cannot be ruled out. We believe that the 'Foreign Trade Policy' likely to be announced by the end of the month, would aim to enhance export competitiveness by giving some sops to exporters particularly in the manufacturing industry.

Source : Equity Bulls

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