India's Trade deficit widens to USD17.8bn in April 2013 - Angel Broking

Provisional data released by the commerce ministry shows that India's export growth although positive for the third straight month at 1.7% yoy (USD24.2bn) was outpaced by the 11.0% yoy (USD42.0bn) increase in imports. Growth in imports during the month was led by 14.9% yoy growth in non-oil imports (as against moderate 5.4% yoy growth in March 2013). Oil imports too rebounded with 3.9% yoy growth during the month (as against 16.6% yoy contraction in March 2013). Resultantly, the monthly trade deficit widened to USD17.8bn, from USD10.3bn in the previous month and USD14.1bn in April 2012.

The trade deficit reported a 72.6% mom surge over March 2013 as seasonally the deficit is known to pick-up during April-May. According to media reports gold imports are likely to have more than doubled at USD7.5bn during April 2013 and we believe this can be mainly attributed to front-loaded demand for gold as prices corrected since appetite for the yellow metal continues to remain high in our economy. While consumer demand has leapt, we believe that investment demand for gold is likely to remain sluggish in the near-term.

In our view the current account deficit, which is one of our key concern areas, has peaked at 6.7% of GDP in 3QFY2013. We are likely to see the CAD moderate to about 4.0 - 4.2% of GDP in the next quarter. We also believe that the recent deceleration in gold and crude prices is likely to benefit our trade balance since these items account for about 45% of our total imports. We expect the CAD to come in at 3.8 - 4.2% of GDP in FY2014 lower than the expected 5.0% of GDP level in FY2013.

Source : Equity Bulls

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